Contrary to media reports and speculations, Tata Sons Pvt Ltd, the holding company of Tata group has never sought any exemption from the mandatory listing requirement applicable to non-banking financial companies (NBFCs) in the upper layer under the scale-based regulation (SBR) framework, reveals a reply received from Reserve Bank of India (RBI) under the Right to Information (RTI) Act. For Tata Sons the listing deadline is September 2025.
Given its size and systemic importance, in September 2022, Tata Sons was classified as an upper-layer NBFC under the category of core investment company (CIC). This classification came with a significant stipulation: the company would be required to list on stock exchanges within three years of being identified as an NBFC-UL or by September next year. Currently, Tata Trusts hold a 66% stake in Tata Sons, while the Shapoorji Pallonji group (SP group) is the second-largest shareholder, with an 18.37% stake.
Responding to query under RTI, the central public information officer (CPIO) of RBI says, “Tata Sons has not sought exemption from listing requirements applicable to NBFCs in the upper layer under the SBR Framework.”
To understand the significance of this revelation, it is crucial to revisit the regulatory framework that underpins this entire saga. In October 2021, the RBI introduced the SBR for NBFCs, a framework designed to enhance regulatory oversight of the non-banking financial sector. Under this framework, NBFCs are categorised into the base layer, middle layer, upper layer and top layer, with increasing regulatory requirements for each ascending layer.
In September 2022, RBI classified 15 NBFCs, including Tata Sons, LIC Housing Finance Ltd, Bajaj Finance Ltd, Shriram Finance Ltd, and Cholamandalam Investment and Finance Company Ltd as upper layer NBFCs under its scale-based regulations (SBR) for non-bank lenders.
The upper layer NBFCs are subject to enhanced regulatory requirements, at least for five years from their classification in the layer, even if they do not meet the parametric criteria in the subsequent years, RBI says.
Further, Tata Sons, given its size and systemic importance, was classified as an upper-layer NBFC under the category of core investment company (CIC). This classification came with a significant stipulation: the company would be required to list on stock exchanges within three years of being identified as an NBFC-UL. For Tata Sons, this deadline falls in September 2025.
In the months following this classification, a narrative began to take shape in the financial media, suggesting that Tata Sons was exploring various avenues to sidestep the listing requirement. These reports, which now appear to have been speculative at best and misleading at worst, outlined several potential strategies that Tata Sons was purportedly considering debt restructuring, asset transfer and regulatory waiver.
Some reports suggested that Tata Sons was looking to become net debt-free, potentially moving it out of the regulatory purview that necessitated listing.
There was speculation about the possibility of transferring holdings in Tata Capital to another entity, thereby altering the company's classification under RBI norms.
Perhaps most significantly, several outlets reported that Tata Sons had directly approached the RBI seeking a waiver from the listing requirement.
The speculation around Tata Sons' potential IPO had led to a significant rally in Tata group stocks earlier this year. In early March, Tata Chemicals and Tata Investment Corporation saw returns of 34% and 16%, respectively. The possibility of unlocking value through a Tata Sons listing had excited investors across the Tata group's listed entities.
This excitement was not unfounded. Tata Sons, as the holding company of the Tata group, holds significant stakes in many of India's blue-chip companies. A public listing of Tata Sons would provide investors with direct exposure to the value of these holdings, potentially at a discount to their cumulative market value.
The potential listing of Tata Sons has significant implications not just for the holding company, but for the entire Tata group ecosystem. Listed Tata group companies, which have accessed public funds and carry a substantial consolidated debt of over Rs2,60,000 crore (as of FY22-23), have invested nearly 12% of the equity share capital of Tata Sons.
Tata Sons' approach to this regulatory requirement—whether to comply, seek exemption, or attempt to restructure to avoid the requirement - will be closely watched. It will not only impact the company and its shareholders but could also set a precedent for how large, systemically important financial entities engage with regulatory requirements.
As we approach the September 2025 deadline, all eyes will be on Tata Sons and RBI. The potential listing of Tata Sons, if it goes ahead, could be one of the most significant events in Indian corporate history, given the conglomerate's size, reach and importance to the Indian economy.
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