[ad_1]
The rally began on March 5 after investment banking firm Spark Capital put out a report saying the chemicals stock could be the biggest beneficiary of the mega IPO.
“Should the Street assign a Rs 10-11 lakh crore valuation to Tata Sons, the intrinsic valuation of the listed Tata Chemicals business is 5-7x FY25 PE, which could potentially re-rate should the investment be liquidated at/or post IPO,” said Vidit Shah of Spark.
Among Tata Group’s listed companies, Tata Motors and Tata Chemicals own a 3% stake each in Tata Sons. Tata Power owns a 2% stake, while Indian Hotels owns a 1% stake in the holding company.
“The only realistic way to get exposure to the potential value unlocking (of Tata Sons stake) is via Tata Chemicals wherein the ownership of Tata Sons potentially amounts to ~80% of the company’s market capitalisation. The stake is worth ~16-21% of the market capitalisation for the other three companies. We calculate the intrinsic valuation of Tata Chemicals to be ~11x FY25 PE (calculated using Bloomberg earnings estimates). Given the commodity nature of the Soda Ash and the potential headwinds faced by the industry due to falling realisations, the valuations have been suppressed,” Shah said.
Also read | If Tata Sons brings out IPO, which listed Tata stock will gain the most?
The market value of Tata Sons’ listed investments is estimated at Rs 16 lakh crore. While the book value of the unlisted investments is Rs 60,000 crore, the market value could be much higher at Rs 1-2 lakh crore given the foray into semiconductors and EV batteries.
“While investors are likely to give a holding company discount of 30-60% while calculating the equity value, we value Tata Sons at Rs Rs7.8 lakh crore post factoring for a 60% holding company discount of its listed investments and valuing the unlisted investments at Rs1.6 lakh crore,” the analyst said.
Should you buy Tata Chemicals shares?
Market experts suggest investors not buy the stock based on market rumours.
“I am not too sure about the Tata Sons IPO. In my experience in the markets, something similar used to be quoted way back in 2007-2008 about Tata Sons getting listed. We have heard enough such stories and I would like to right now disbelieve it in the first instance unless I really see a proper document getting filed,” said Street veteran analyst Mahantesh Sabarad.
RBI had classified Tata Sons as an upper-layer NBFC last year and therefore the company has time till September 2025 to list on stock exchanges, according to an earlier report. However, there has been no communication from the Tatas on the IPO roadmap ahead.
(Disclaimer: Recommendations, suggestions, views and opinions given by the experts are their own. These do not represent the views of The Economic Times)
[ad_2]
Source link