The board of Tata Capital Ltd on Monday approved an initial public offering (IPO) of the company and a ₹1,504-crore rights issue to its existing shareholders.

Tata Capital is the financial services arm of the Tata group.

The proposed IPO will comprise a fresh issue of up to 23 crore shares and an offer for sale (OFS) by certain existing and eligible shareholders.

The share float is subject to market conditions, regulatory clearances and other considerations, Tata Capital said in a regulatory filing.

While Tata Capital did not disclose the timeline for the IPO, it is likely to happen before the September 30, 2025 deadline of the Reserve Bank of India (RBI).

In September 2022, the RBI had classified Tata Capital as an upper layer non-banking finance company (NBFC). These NBFC-UL firms have to be listed by September 30, 2025.

Tata Sons is the largest shareholder of Tata Capital holding around 93 per cent. The rest of the shareholders include Tata Investment Corporation, Tata Consumer Products, Tata Chemicals, Tata Power and Tata Motors.

The shares of Tata Investment Corporation on Tuesday surged 7.28 per cent to settle
at ₹6,168.80 on the BSE on news of the potential IPO of Tata Capital.

Rating agency Fitch which recently affirmed Tata Capital’s long-term foreign- and local-currency issuer default ratings (IDRs) at BBB said that Tata Sons’s shareholding in the NBFC is unlikely to fall below 75 per cent in the foreseeable future following Tata Capital’s planned public listing.

A proposed merger of Tata Capital and Tata Motors Finance Ltd (TMFL) is before the National Company Law Tribunal (NCLT).

The process for the proposed IPO is likely to gather further pace after the nod from the tribunal.

For the Tata group, the Tata Capital listing will be the second after Tata Technologies in 2023.

“The planned merger between TCL and TMFL highlights TCL’s position as the flagship entity for Tata Group’s financial services segment and adds to its synergies with the broader group,’’ Fitch said.