Tata Sons may be valued up to Rs 12.5 lakh cr in IPO
Tata Sons' potential IPO valuation is estimated between ₹9-12.5 lakh crore., reflecting a discount on its underlying portfolio worth ₹15-16 lakh crore. Investors will price listed stakes and unlisted businesses, applying a holding company discount. The Reserve Bank of India rejected Tata Sons' plea to remain private. This decision effectively mandates the conglomerate's public listing soon.
Mumbai: Tata Sons may be valued up to Rs 12.5 lakh crore in a potential IPO, according to multiple investment bankers and valuation experts. This valuation is significantly lower than the underlying portfolio worth of ₹15-16 lakh crore. The valuation depends on how investors price the listed and unlisted assets, along with applying a discount typical for a holding company structure.
An analysis by a top domestic bank's equity capital markets head suggests an underlying value of ₹15-16 lakh crore, with ₹12 lakh crore from listed holdings and ₹4 lakh crore from unlisted assets. The IPO will also face a 41-45% holding company discount and an additional 10-15% discount on the IPO price. The unlisted portfolio carries ₹40,000 crore in losses, partially funded by dividend income.
Experts advise valuing each listed stake at market prices and estimating unlisted businesses using the last real transaction or a comparable transaction, adding option value for businesses like semiconductors and digital. The IPO valuation should account for minority holder control, tax leakage, and limited liquidity. Bajaj Holdings and Godrej Industries have similar discounts of 30-60%.
A leading global brand valuation firm warns of further constraints on Tata Sons' value, citing regulatory policies and the infusion of trustees and directors after the IPO, which could lead to a conservative outlook.
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