A CNBC-TV18 newsbreak from over the weekend cites sources, who said that the Reserve Bank of India (RBI) has rejected Tata Sons’ application to de-register itself as an Upper Layer NBFC, asking them comply with their regulations and go public at the earliest.
“Our analysis, based on publicly available information, implies a total market value of ₹13 lakh crore for Tata Sons based on the market capitalization of group companies, the book value of unlisted entities and other investments as per Tata Sons’ financial year 2026 annual report,” HSBC wrote in its note.
Tata Chemicals’ value creation scenarios come at various Holding Company Discount scenarios as well for Tata Sons, which range from 0% to 75%. On a per share basis, the potential value creation for Tata Chemicals could range between ₹80 to as high as ₹1,284 based on its 2.5% stake in Tata Sons.
Currently, HSBC has a “hold” rating on Tata Chemicals with a price target of ₹720 as their sum of the parts valuation reflects the 2.5% stake at a 35% holding company discount.
Here are the four potential value creation scenarios for Tata Chemicals as highlighted by HSBC in its note:
As per the Tata Sons’ Annual Report, the total number of ordinary shares of the conglomerate stood at 0.4 million, of which, Tata Chemicals owned 0.01 million, or 2.5%, taking the total value to ₹32,698 crore.
Scenario 1
At a 0% Holding Company Discount, Tata Sons’ overall market value of ₹12.9 lakh crore, will give Tata Chemicals a value of ₹32,698 crore.
Based on Tata Chemical’s current market capitalization of ₹15,602 crore, a 0% holding company discount will mean a incremental value creation of ₹32,698 crore for Tata Chemicals, or 210%, by dividing the value creation figure by the current market capitalization and multiplying it with 100.
On a per share basis, this would translate into value creation of ₹1,284 for Tata Chemicals, HSBC wrote in its note.
Scenario 2
Keeping the Tata Sons market value same at ₹12.9 lakh crore, the second scenario increases the holding company discount to 25%.
Post the holding company discount, Tata Sons’ market capitalization will drop to ₹9.68 lakh crore, thereby taking Tata Chemicals’ value in the company to ₹24,524 crore. After a 25% holding company discount, the value will stand at ₹18,393 crore, or 118%, taking the per share value creation to ₹722 apiece, as per HSBC.
Scenario 3
The third scenario highlighted by HSBC increases the holding company discount to 50%.
Assuming a 50% discount, the market value for Tata Sons falls to ₹6.45 lakh crore, and subsequently, the value of Tata Chemicals’ stake will be ₹16,349 crore, which after the 50% holding company discount, will be ₹8,147 crore.
Based on Tata Chemicals’ current market cap, the value creation for Tata Chemicals in percentage terms will be 52% and on a per share basis, will be ₹321, based on Tata Chemicals’ current market price of ₹612, HSBC noted.
Scenario 4
The last scenario increases the holding company discount for Tata Sons to 75%, taking its market value to ₹3.22 lakh crore, thereby taking Tata Chemicals’ stake value to ₹8,174 crore.
Assuming a 75% holding company discount, that figure drops to ₹2,043 crore, resulting in a value creation of 13% and around ₹80 on a per share basis, assuming the same current market price of ₹612 apiece, according to HSBC.
Shares of Tata Chemicals are locked in a 20% upper circuit on Tuesday at ₹734.9. The stock is the top gainer on the Nifty 500 index.
Also Read: Explained | How Tata Sons listing may affect Tata Group shareholders
