IPO windfall: IFC set to reap 13x gains in Tata Capital listing; World Bank arm trims stake

The International Finance Corporation (IFC) is poised to book hefty returns from Tata Capital’s upcoming $2 billion (Rs 17,000 crore) initial public offering, as the World Bank Group arm looks to partially exit its investment in the non-banking finance company.According to the updated draft red herring prospectus (DRHP), IFC will offload 3.58 crore shares in the offering, paring its holding from a bet made in 2011 through Tata Capital’s cleantech arm.Tata Capital is expected to launch its IPO in the first half of October after the Reserve Bank of India extended the deadline for its stock market debut. Earlier, the company was required to complete its listing by September 30.IFC had partnered with Tata Capital in 2011 to set up Tata Cleantech Capital Ltd (TCCL), a platform focused on financing renewable and sustainable infrastructure projects. At a time when clean energy in India was still subsidy-dependent, TCCL became one of the first dedicated financiers of green energy.Over the years, TCCL has backed more than 500 renewable projects spanning solar, wind, biomass, small hydro, water treatment, and electric mobility.

Its sanctioned capacity exceeds 22,400 MW, and by FY25, its cleantech and infrastructure finance loan book crossed Rs 18,000 crore, growing at nearly 32 per cent CAGR over the past two years, as per draft filings.Following TCCL’s merger with Tata Capital, IFC owns 7.16 crore shares, or about 1.8 per cent of the parent NBFC. It plans to divest nearly half of this holding in the IPO.IFC had entered at an adjusted price of around Rs 25 per share, valuing its investment at about Rs 179 crore.

Based on Tata Capital’s rights issue price of Rs 343 per share in July, this stake is now worth nearly Rs 2,458 crore, implying a notional profit of Rs 2,278 crore — almost 13 times its entry value. The IPO price is expected to be higher, which could further boost returns.The upcoming IPO will comprise a fresh issue of up to 21 crore shares and an offer for sale of up to 26.58 crore shares, including 23 crore shares by promoter Tata Sons and 3.58 crore shares by IFC.Tata Sons, which currently holds 88.6 per cent of Tata Capital, will continue as the dominant shareholder post-listing.Proceeds from the fresh issue will be used to augment Tier-I capital and support lending growth. If successful, the IPO will become the largest public issue in India’s financial sector and the Tata Group’s second market debut in recent years, following Tata Technologies’ listing in November 2023.The listing also meets the RBI’s mandate for upper-layer NBFCs to be publicly listed within three years of classification. Tata Capital was designated an upper-layer NBFC in September 2022.