Tata Group Seeks RBI Waiver to Avoid Listing Holding Company Tata Sons

Tata Group seeks RBI waiver to avoid NBFC listing, plans to use TCS share sale proceeds to reduce debt and simplify corporate structure.

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Dil Bar Irshad
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Tata Group Seeks RBI Waiver to Avoid Listing Holding Company Tata Sons

Tata Group Seeks RBI Waiver to Avoid Listing Holding Company Tata Sons

The Tata Group has approached the Reserve Bank of India (RBI) seeking a waiver to avoid listing its holding company and non-banking finance firm, Tata Sons. The group plans to use the $1.1 billion proceeds from the sale of its Tata Consultancy Services (TCS) shares to reduce its debt below 1 billion rupees, which would allow it to cease being classified as an upper-layer non-banking financial company (NBFC).

In 2021, the RBI issued regulations requiring large NBFCs to list their shares on a stock exchange within three years. Tata Sons, classified as an 'upper layer' NBFC by the RBI in 2022, must go public by September 2025 to comply with this regulation. However, the Tata Group has reportedly told the RBI that it has repaid much of its debt and is exploring ways to be exempted from the listing requirement, such as restructuring its balance sheet or hiving off Tata Capital.

Why this matters: The potential IPO of Tata Sons could be one of the biggest in the history of the Indian stock market, with the Pallonji Mistry group's 18.4% stake potentially valued at around Rs 198,000 crore. The Tata Group's move to seek a waiver from the RBI highlights the company's efforts to simplify its corporate structure and reduce its regulatory burden.

Tata Sons has said that it does not fall under the upper-layer NBFC norms and should be exempt from the rules. This comes after the company carried out certain restructuring and reduced debt. Earlier, Tata Sons raised around Rs 9,300 crore by selling shares in its IT subsidiary Tata Consultancy Services (TCS), and used a part of the proceeds to repay debt.

The Tata Group's flagship company, TCS, has been performing well, with a 9.1% growth in its March quarter net profit and a 9% growth in its annual net profit for fiscal year 2023-24. The group's move to seek a waiver from the RBI is aimed at simplifying its corporate structure and reducing its regulatory burden, as being categorized as an upper-layer NBFC would require a high degree of compliances and disclosures.

Key Takeaways

  • Tata Group seeks RBI waiver to avoid listing Tata Sons as an NBFC
  • Tata plans to use $1.1B from TCS share sale to reduce debt below 1B rupees
  • RBI requires large NBFCs to list shares within 3 years; Tata Sons must comply by 2025
  • Potential Tata Sons IPO could be one of the biggest in Indian market history
  • Tata seeks exemption to simplify corporate structure and reduce regulatory burden