Tata Sons, the holding company of the Tata Group, is exploring options to avoid RBI-mandated listing, including a reorganisation to exclude itself from being categorised as an 'upper-layer' NBFC (Non-Banking Financial Company). On September 14, the Reserve Bank of India (RBI) published a roster of 15 NBFCs classified in the upper-layer category. The list included the names of Tata Sons and Tata Capital Financial Services.
As per the RBI, upper-layer NBFCs are obliged to adhere to a strict regulatory framework, including mandatory listing within three years of notification. This listing requirement, similar to that imposed on private banks, aims to promote broad ownership.
Tata Sons, the principal investment holding company and promoter of Tata Companies, was first listed as an upper-layer NBFC in September 2022. Now, the company is mandated to prepare for a stock market listing by September 2025.
Although Tata Sons has time to follow the RBI directive, a Times of India report citing sources said that the company may explore various avenues, possibly including a restructuring to avoid the upper-layer category. The RBI mandates that upper-layer NBFCs must formulate a board-approved roadmap for the implementation of its regulations within three months from the notification date. However, the report said that it is not clear whether the board of Tata Sons has approved such a plan.
Further, a potential IPO for Tata Sons, with an estimated valuation of approximately Rs 11 lakh crore, could be India's biggest public offering to date. If Tata Sons chooses to proceed with an IPO at this valuation, a 5 per cent stake offering would be valued at Rs 55,000 crore, the report stated.
Additionally, Tata Sons’ other subsidiary Tata Capital Financial Services is also on the upper-layer NBFC list. However, the company plans to merge Tata Capital Financial Services into Tata Capital and list them together.
Tata Sons, led by Chairman N. Chandrasekaran, previously considered seeking an exemption from the RBI's upper-layer NBFC classification announced in 2022, the report noted.
Analysts suggest that while an IPO would increase Tata Sons' liquidity, the issue is the holding company could face a valuation discount, as investors typically apply for such companies during the valuation phase.
In its report for the financial year 2022-23, Tata Sons said, “The simplified corporate structure will create a larger unified entity with a stronger capital and asset base, and shall help us move towards a listing-ready structure aligned with the RBI’s regulations.”