Tata Capital’s IPO will lead to “increased competition across various segments – housing, auto, SME,” the brokerage noted. It further added that the company’s growth rate has been strong, and listing will impose more demands to sustain higher growth rates.
However, it noted that since Tata Capital is the third largest NBFC, listing at premium or discount valuations could be a catalyst for re-rating or de-rating of the NBFC sector.
As a canon event for many NBFCs that have recently listed, including HDB Financial Services, if Tata Capital lists at a discount, it could reset other unlisted NBFC valuations, the brokerage said.
A discounted listing, while hurtful for short-term investors, is a positive indicator to bring down valuations for the company’s stock, especially when Tata Capital’s price-to-book ratio stands at a staggering 6.4 at the current unlisted market price.
However, the brokerage highlighted that the unlisted price cannot be taken as a benchmark for the listing price. “As seen in the case of HDBFS, the listing price was 40% lower than the price in the unlisted market. Even if one assumes a 60% discount to the unlisted market price for Tata Capital (estimated IPO price of Rs 300) it could imply upward re-rating of other listed NBFCs.”
