Tata Chemicals’ Stock Surges on Potential Tata Sons Listing, Analysts Optimistic

Shares of Tata Chemicals have seen a remarkable surge over the past six trading sessions, reaching a new all-time high amidst speculation surrounding a potential listing of Tata Sons, the parent company of the Tata Group.

The recent momentum in Tata Chemicals’ stock price comes following a note by Spark Capital on March 4, highlighting the likelihood of Tata Sons becoming listed within the next 18 months. This anticipation stems from Tata Sons being classified as an upper layer Non-Banking Financial Company (NBFC) by the Reserve Bank of India in September 2022, necessitating its listing by September 2025.

Of the Tata Group entities holding ownership in Tata Sons, which includes Tata Motors, Tata Chemicals, Tata Power, and Indian Hotels, Tata Chemicals stands out as the primary channel for investors to potentially benefit from this value unlocking opportunity.

While Tata Sons’ stake in Tata Chemicals represents a significant proportion of the latter’s market capitalization, compared to other Tata Group companies, the intrinsic valuation of Tata Chemicals could experience a re-rating post the IPO of Tata Sons, should it be realized.

Despite a recent underperformance in the early months of 2024 due to industry headwinds and commodity price challenges, Tata Chemicals’ stock has witnessed a revival in investor interest driven by the prospect of Tata Sons’ listing.

Following the surge, Tata Chemicals is presently trading at a higher valuation multiples compared to its historical averages, with peer companies like SRF and Gujarat Fluorochemicals also trading at elevated levels in the market.