8 Parent Companies and Their Subsidiaries' Upcoming IPOs

A wave of new IPOs is on the horizon and some of the biggest names in business are leading the charge. From financial services to renewable energy, a wide range of companies are set to hit Dalal Street very soon.

Parent companies often leverage their subsidiaries to expand into new markets, diversify their revenue streams, or monetise valuable assets. A common strategy to achieve these goals is through Initial Public Offerings (IPOs).

By listing their subsidiaries on public exchanges, parent companies can raise capital to fuel growth, enhance market visibility, and unlock potential value. This strategic move can also provide subsidiaries with greater autonomy and access to a wider pool of investors.

In this article, we explore the key parent companies and their highly anticipated upcoming IPOs.

#1 Bajaj Finserv & Bajaj Finance - Bajaj Housing Finance

Bajaj Housing Finance is a subsidiary of both Bajaj Finserv and Bajaj Finance.

Bajaj Finance, a leader in consumer and SME lending, owns 100% of Bajaj Housing Finance, while Bajaj Finserv, a major player in financial services and insurance, holds a 51.3% stake in Bajaj Finance. As a result, both companies are key promoters of this highly anticipated IPO.

Bajaj Housing Finance has established itself as a leading HFC in India. As of FY24, Bajaj Housing Finance became the largest non-deposit-taking HFC in India (in terms of AUM) within just seven years of starting mortgage operations.

The company stands as the second most profitable HFC in India, with robust returns on average assets and equity for FY24.

The initial public offer (IPO) of Bajaj Housing Finance is among the most awaited issues this year, coming from the Bajaj Group, which already boasts of marquee-listed players like Bajaj Finance, and Bajaj Auto on the Street.

The company is set to launch its Rs 65.6 bn IPO on 9 September. In the IPO, apart from the regular reservation for retail, institutional and non-institutional investors, Bajaj Housing has reserved a special shareholders quota.

Under the shareholder's reservation, the company has reserved shares up to Rs 5 bn. Investors who hold shares of Bajaj Finance or Bajaj Finserv as of the RHP filing can bid for the IPO in this category.

In addition, Bajaj Housing Finance has set aside Rs 2 bn worth of shares for eligible employees. The net offer will see 50% of shares allocated to qualified institutional buyers, 15% to non-institutional investors (NII), and 35% to retail investors.

The IPO will fetch the company around Rs 65.6 bn, which includes an OFS of Rs 30 bn by Bajaj Finance. The company will be valued at around Rs 582.9 bn at the upper end of the price band of Rs 70 per share.

This move places Bajaj Housing Finance among the largest IPOs in India this year, following significant offerings from companies like Ola Electric Mobility and Bharti Hexacom.

The company intends to issue new shares valued at up to Rs 35.6 bn, primarily aimed at bolstering its capital base. Additionally, Bajaj Finance, the parent company, will be selling shares up to Rs 30 bn.

The Indian IPO market has seen a strong surge this year, with approximately 200 companies raising US$ 7.1 bn as of 28 August more than double the amount raised during the same period last year.

For further insights, check out our article - Bajaj Housing Finance Rs 65 Billion IPO: The Long-Awaited IPO Arrives.

#2 Tata Motors - Tata Passenger Electric Mobility

Next is the IPO of Tata Passenger Electric Mobility, the electric vehicle division of Tata Motors.

In 2021, Tata Motors inaugurated a new subsidiary, Tata Passenger Electric Mobility (TPEML), for the sole purpose of manufacturing EVs. TPEML will hold 100% of the share capital in its EV unit and the initial capital allocated was Rs 7 bn.

In January 2023, TPEML acquired Ford India Private Limited's manufacturing plant in Sanand, Gujarat. It gained a state-of-the-art manufacturing plant with a capacity of 300,000 units per annum that can be scaled to 420,000. In 12 months, TPEML revamped the facility to roll out Tata cars.

TPEML has a robust pipeline of "New Forever" products that can set momentum in the electric vehicles space. Currently, TPEML has launched two electric models - Nexon EV and Tiago EV - that are doing well on Indian roads. TPEML boasts a staggering 80% market share in the Indian EV market.

TPEM is already valued at a staggering US$ 9.5-10 billion. The IPO of Tata Passenger (TPEML) is expected to be valued between US$ 1-2 bn. The IPO window is expected to open within the next 12 months.

As of March 2023, the company's total revenue from operations stood at Rs 419.8 million (m) and including other income, the total income comes to Rs 2,759.9 m. Net profit for the same year stood at Rs 530 m.

A company established 3 years ago is already raking up profits with more plans for strategic expansions. In the next 3-4 years, the company plans to launch 10 new electric cars, further solidifying its position as a major EV player.

The recent price reduction on existing models shows its dedication to bringing EVs to the mainstream. This is great news for consumers and investors, as it broadens the market potential.

TPEM is also setting their sights on the luxury segment. It has joined forces with Jaguar Land Rover (JLR), known for its luxurious vehicles. This partnership will create a premium EV series called Avinya.

The company is about to launch innovative products with 5 new EVs built on its acti.ev architecture. This platform promises a range of 300-600 km on a single charge and fast charging speeds.

For further insight into the IPO, read our detailed editorial- One More Tata Group Stock to Ride Gains in the EV Ecosystem.

#3 ONGC - ONGC Green Energy

Next on the list is the IPO of ONGC Green Energy, the subsidiary of ONGC.

Oil and Natural Gas Corporation (ONGC), the largest crude oil and natural gas company in India, incorporated a wholly owned subsidiary, ONGC Green, on 27 February 2024.

ONGC Green engages in the value-chains of energy business viz. renewable energy, bio-fuels/ bio-gas business, green hydrogen and its derivatives like green ammonia, green methanol, storage, carbon capture utilisation, and storage and LNG business.

The company in March approved a Rs 990 m equity investment in its newly created wholly-owned subsidiary ONGC Green. Its board has given in-principle approval to invest an additional Rs 11 bn in ONGC Green.

ONGC Green might leverage ONGC's existing infrastructure and expertise for efficient project development and management in the renewable energy sector. It also plans to expand beyond India by exploring opportunities in international renewable energy markets.

All this makes ONGC Green a game changer IPO for the Indian market. While there have been no official announcements regarding an IPO, the company may consider such plans soon.

#4 NTPC - NTPC Green Energy

Next on the list is the IPO of NTPC Green Energy, the renewable energy arm of PSU giant NTPC. It's a wholly-owned subsidiary of NTPC, India's largest power company.

This subsidiary focuses on accelerating NTPC's renewable energy growth and expanding its green footprint across India and potentially overseas.

NTPC Green Energy plans to construct a 60-GW renewable portfolio over the next decade. It plans to develop its non-fossil companies using share sale earnings.

It's also looking to develop pumped hydro storage and green hydrogen and ammonia manufacturing projects. The company is also working on e-mobility and waste-to-wealth projects.

NTPC is preparing to launch the IPO of its green energy arm, NTPC Green Energy in October or November 2024. NTPC Green Energy Ltd (NGEL) recently selected investment bankers for the listing.

At a projected issue size of Rs 100 bn, NTPC Green's IPO will be the biggest initial share sale by a public sector company since the Rs 210 bn IPO of Life Insurance Corp. in May 2022

The IPO proceeds are intended to be used to fund ongoing and future projects across solar, green hydrogen and green ammonia, the company had said.

Petronas had offered to buy the stake at around Rs 40 billion (bn) for NGEL, pipping two other companies for the stake.

This will be the second listing in two years of a government-owned company in the renewable energy sector. Last November, the Indian Renewable Energy Development Agency saw its IPO oversubscribed 38.8 times.

#5 HDFC Bank - HDB Financial Services

Next on the list is HDFC Bank's arm HDB Financial Services. HDFC Bank is the parent company, holding a 94.6% stake.

HDFC Financials was spun off from HDFC Bank in 2018 to focus on the housing finance business. This separation allowed both companies to concentrate on their core areas of expertise and achieve greater operational efficiency. The company provides secured and unsecured loans to its clients.

The IPO is expected to be launched in either the third quarter or the last quarter of FY25. The bank needs to complete HDB's IPO before September 2025 to comply with RBI norms.

According to the central bank rule, upper-layer NBFCs like HDB Financial Services must list within three years of being designated as such. Being classified as NBFC back in 2022, HDB Financials has to go public by September 2025.

According to market reports, HDB Financial Services is expected to be valued between US$ 9 billion (bn) to US$ 12 bn (Rs 750 bn to Rs 1,000 bn) at the time of the IPO, depending on market conditions.

HDFC Bank, holding almost 95% of HDB, may sell a 10% stake in the IPO, potentially raising Rs 75 bn to Rs 100 bn. Additionally, HDFC Bank may consider a pre-IPO share placement with investors.

HDB Financial Services is currently valued at around US$ 7.9 bn (Rs 656.9 bn), with its unlisted shares priced at Rs 830 apiece. After listing, the firm will be one of the biggest listed finance companies in market capitalisation.

What is not clear at the moment is whether HDFC Bank will pursue any off-market sale of HDB Financials' shares after talks with Mitsubishi UFJ Financial Group (MUFG) didn't fructify.

HDB Financial Services is likely to prioritise expanding its branch network across India. Their goal is reportedly to have 200 experience centres operational in 120 Indian cities.

For more insights about the IPO, check out our editorial- Upcoming IPO of HDB Financial Services: HDFC Bank Can Finally See Value Unlocking.

#6 Canara Bank - Canara Robeco Asset Management

Next on the list is PSU Canara Bank-backed IPO Canara Robeco Asset Management. It's a joint venture between Canara Bank and Robeco Group.

Canara Bank on 27 December said it is going to list its mutual fund subsidiary, Canara Robeco Asset Management. The lender did not comment on the timeline for the same.

Canara Bank in March 2024 said it would sell a 13% stake in the arm of Canara Robeco Mutual Fund through an IPO, and the lender has received the board's consent for the same. This is, however, subject to approvals from the Reserve Bank of India, the finance ministry, and the government.

Incorporated in 1993, Canara Robeco MF was earlier known as Canbank Mutual Fund. In 2007, Canara Bank partnered with the Robeco Group through a joint venture and the mutual fund was renamed Canara Robeco Mutual Fund.

If Canara Robeco AMC gets listed, it will be the fifth listed asset management company in India. Currently, Aditya Birla Sun Life AMC, HDFC Asset Management, Nippon Life India Asset Management, and UTI Asset Management are the four listed mutual funds in India.

As of December 2023, Canara Robeco MF had Rs 839.3 bn worth of assets under management, which was 1.6% of the mutual fund industry's AUM.

#7 Hero MotoCorp - Hero FinCorp

Next on the list is the IPO of Hero FinCorp, the financial services arm of Hero MotoCorp.

Hero MotoCorp is the world's largest two-wheeler manufacturer. It owns around 40% stake in Hero FinCorp. It's the parent company of Hero FinCorp, which is a non-banking financial company (NBFC) focused on providing retail and SME loans.

The company has a strong track record of growth and profitability, driven by its association with Hero MotoCorp and its focus on the Indian two-wheeler market.

The company on 1 August 2024 filed its draft red herring prospectus (DRHP) with the capital market regulator for an IPO worth Rs 36.7 bn. According to the DRHP, the proposed IPO consists of an Offer For Sale (OFS) of Rs 15.7 bn by investor shareholders and a new issue of shares valued at Rs 21 bn.

AHVF II Holdings Singapore II Pte. Ltd, Apis Growth II (Hibiscus) Pte. Ltd., Link Investment Trust (via Vikas Srivastava), and Otter Ltd. are the entities offering shares in the OFS.

The proceeds from the fresh issue will be used to meet future capital requirements, particularly for onward lending.

#8 Bank of Baroda - India First Life Insurance

Last on the list is the Bank of Baroda-backed IPO of India First Life Insurance.

Bank of Baroda, the country's third largest PSU bank holds a 65% stake in the firm followed by Warburg Pincus affiliate Carmel Point Investments India which holds 26% and Union Bank of India which holds a 9% stake.

Bank of Baroda promoted IndiaFirst Life Insurance Company is a private life insurance player. The Mumbai-based company is among the fastest-growing private life insurers in terms of new business IRP in financial year 2022.

Although IndiaFirst Life Insurance received approval from SEBI for an IPO in March 2023, the company chose to hold off on the plan due to market conditions.

The proposed public issue consists of a fresh equity share issue worth up to Rs 5 bn and an offer-for-sale (OFS) of up to 141.3 m shares by the promoter and other selling shareholders. Bank of Baroda planned to offload 89 m shares, Carmel Point Investments 39.2 m shares, and Union Bank of India 13.1 m shares.

According to reports from July 2024, the IPO has been deferred but not shelved, with plans to proceed once market conditions improve, likely within 18 months.

The delay was driven by regulatory challenges and unfavourable market conditions. IndiaFirst Life aims to reach Rs 300 bn in assets under management (AUM) and achieve double-digit growth before making its market debut.

Conclusion

Investing in the IPO of a top parent company's subsidiary offers several compelling advantages. First, these subsidiaries often benefit from the financial strength, resources, and market expertise of their parent companies, providing them with a strong foundation for growth.

Additionally, such IPOs can offer access to emerging sectors, like renewable energy or EV services, where the subsidiary may be well-positioned to lead in innovation.

With backing from reputable parent companies, these subsidiaries are often viewed as lower-risk investments with the potential for substantial returns as they expand independently.

However, investing in these IPOs also comes with risks. Market conditions and the performance of the parent company can impact the subsidiary's stock value. There may be uncertainties regarding how well the subsidiary will perform independently of its parent.

Additionally, the IPO process itself can be volatile, with initial trading often characterised by significant price fluctuations.

For more information on IPOs, check out the list of upcoming IPOs.

Disclaimer: This article is for information purposes only. It is not a stock recommendation and should not be treated as such. Learn more about our recommendation services here...