A recent note from Macquarie supports the possibility of a lower IPO band. It points out that even if Tata Capital lists “at a 60% discount to its unlisted market price”, the company would still trade at higher valuations than many of its NBFC peers.
“Tata Capital’s FY25 price to book multiple at Rs 775 stands at 6.4 times higher than HDB Financial Services (3.4 times), CIFC (5.3 times), and BAF (5.7 times),” the report states.
Tata Capital, the third-largest diversified NBFC in India with AUM of Rs 2.3 lakh crore, is listing primarily to augment its Tier-I capital and comply with the RBI’s NBFC upper-layer norms.
Macquarie notes that the listing is expected to create a new benchmark in the sector, especially as it follows the merger with Tata Motors Finance Ltd. (TMFL), which has diluted overall return ratios.
With IPO price bands increasingly being set well below unlisted market prices, investors should exercise caution when valuing companies based solely on grey market quotes. As Haldea stressed, “The unlisted market is unregulated, and its pricing mechanisms are speculative at best.”
Unless there’s a dramatic shift in institutional sentiment, Tata Capital’s IPO is unlikely to match the hype of its unlisted valuation, a trend that appears to be becoming the new normal.
