Tata Chemicals shares up nearly 35% in six sessions; Here's the key reason behind its surge

But why are shares of Tata Chemicals rallying due to a potential listing of Tata Sons?

As per the Spark Capital note released earlier this week, four Tata Group companies - Tata Motors, Tata Chemicals, Tata Power and Indian Hotels have ownership in Tata Sons. However, the only realistic way to get exposure to this potential value unlocking opportunity is via Tata Chemicals.

Tata Sons' ownership in Tata Chemicals amounts to nearly 80% of the company's overall market capitalisation, while for the other three companies, that figure lies between 16% to 21%, according to Spark Capital.

Shares of Tata Chemicals were underperformers in the first two months of 2024, declining 7% and 9% respectively, which Spark Capital attributes to the commodity nature of Soda Ash and industry-wide headwinds faced due to falling realisations.

However, in case the street assigns a valuation between ₹10 lakh crore to ₹11 lakh crore for Tata Sons, the intrinsic valuation of Tata Chemicals should re-rate should that investment be liquidated at or post the IPO.

Post the recent surge, Tata Chemicals is trading at a financial year 2025 price to earnings multiple of 29.39 times, which is well above its five-year average of 12.3 times. In comparison, peers like SRF and Gujarat Fluorochemicals are trading at a higher valuation compared to Tata Chemicals.

Shares of Tata Chemicals are trading another 8% higher at ₹1,271.35.