Tata Chemicals Ltd witnessed a significant drop in its share price on Monday morning, tumbling about 9% amidst reports suggesting that Tata Sons is exploring alternatives to avoid an initial public offering (IPO). This development has led to a reassessment of value-unlocking expectations for Tata Chemicals, with Kotak Institutional Equities stating that it should deflate speculation surrounding the company.
Kotak Institutional Equities reiterated its fair value for Tata Chemicals at Rs 780, expressing a continued anticipation of a decline in earnings per share (EPS) for the Tata Group entity by approximately two-thirds over FY2023-25E. This projection is attributed to diminishing margins on soda ash, a key product for Tata Chemicals.
Despite a recent surge of 40% in Tata Chemicals shares over the previous six trading sessions, Kotak suggests that the recent speculative surge in the stock should be viewed as an opportunity to exit, thus issuing a ‘Sell’ rating on the stock.
On Monday, Tata Chemicals stock experienced a sharp decline of 8.57%, hitting a low of Rs 1,202.10 on the BSE. This downward movement follows a remarkable six-day winning streak during which the stock surged nearly 40%.
According to Kotak, Tata Sons appears reluctant to pursue a public offering for Tata Chemicals. Reports indicate that Tata Sons initially sought an exemption from the ‘upper-layer NBFC’ regulations from the Reserve Bank of India (RBI). However, with this avenue appearing unlikely, Tata Sons is now exploring various restructuring options to circumvent the regulatory constraints.
