Exploring the Surge in Tata Chemicals Stock: A 24% Rise in Just Two Days

In a striking turn of events, shares of Tata Chemicals Ltd. have witnessed a remarkable increase, climbing by 24% over a span of just two days. This surge was triggered by a report from a Chennai-based advisor that shed light on the potential valuation of Tata Sons Ltd. in the event of an initial public offering (IPO), which captured the attention of investors.

Why Tata Chemicals Stock Rocketed

The sudden spike in investor interest can be attributed to the upcoming listing requirement for Tata Sons, the flagship holding company of the Tata Group. Classified as an upper-layer non-bank financial company in October 2021, Tata Sons is now mandated to go public by September 2025. An analysis by Spark Capital Advisors (India) Pvt. suggests that the IPO could be valued at a staggering Rs 11 lakh crore, with the offering itself forecasted to be around Rs 55,000 crore.

The Implications for Tata Chemicals

Tata Chemicals, known for its soda ash operations and manufacturing, holds a 3% stake in Tata Sons, similar to Tata Motors Ltd. Other group companies like Tata Power Co. and Indian Hotels Co. have 2% and 1% stakes respectively. Based on Spark's assessment, the 3% stake owned by Tata Chemicals in Tata Sons could be valued at Rs 20,000 crore. This figure accounts for almost 60% of Tata Chemicals' current market capitalization which stands at Rs 34,000 crore.

Given the valuation, the intrinsic worth of Tata Chemicals is estimated to be 11 times the forecasted FY25 PE (Price to Earnings ratio). However, the valuation has been subdued by the commodity nature of its soda ash product and impending industry challenges, leading to reduced earnings. Spark Capital's report suggests that if the market were to apply a Rs 10–11 lakh crore valuation to Tata Sons, the intrinsic value of Tata Chemicals' listed business could be approximately 5–7 times its FY25 earnings. This could lead to a re-rating of the company's stock value, potentially increasing significantly upon the liquidation of the investment during or after the IPO.

Alongside Tata Chemicals, other Tata Group stocks have also seen an uptick, with Tata Power's shares increasing by 7.35% and Tata Investment Ltd. by 10.2% in the same two-day window.

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