Tata Group approaches RBI to seek regulatory waiver to avoid listing as NBFC: Report

Tata Group has approached the Reserve Bank of India seeking a waiver in order to avoid listing its holding company and non-banking finance firm, Tata Sons. In October 2021, the RBI had issued revised regulations under which large non-banking finance companies (NBFCs) were asked to list their shares on a stock exchange within three years. The salt-to-power conglomerate needs to thereby be listed by September 2025 at the latest in order to comply with this regulation.

Tata Sons has been exploring the opportunity to be exempted from the 2021 regulation, the Economic Times reported. Tata Group has reportedly told the RBI that it has repaid much of its debt, ET Now reported.

The Reserve Bank of India has been tightening norms around NBFCs since the collapse of IL&FS in 2018. The RBI framework categorises NBFCs in Base Layer (NBFC-BL), Middle Layer (NBFC-ML), Upper Layer (NBFC-UL) and Top Layer (NBFC-TL). In September 2022, Tata Sons was put under the NBFC-UL category.

The RBI circular dated October 22, 2021, directed that NBFC-UL should be mandatorily listed within 3 years of identification as NBFC-UL. Disclosure requirements should be put in place on the same lines as applicable to a listed company even before the actual listing, as per Board approved policy of the NBFC, the RBI said.

The central bank classified Tata Sons as an “upper layer” NBFC in 2022, suggesting it must go public within three years. This could possibly be one of the biggest IPO in the history of the Indian stock market.

Tata Trusts, headed by Ratan Tata, holds 66 per cent stake in Tata Sons. As the Pallonji Mistry group holds 18.4 per cent stake in the company, the Mistry group stake is likely to be valued at Rs 198,000 crore.

Upper layer NBFCs are identified by the Reserve Bank for increased regulatory requirements based on specific criteria and scoring. The top ten NBFCs by asset size always belong to this category. Tata Sons, ranked fourth, is the sole core investment company in the RBI's list.

Citing a note by wealth management firm Spark PWM, Bloomberg had reported that the IPO of Tata Sons could fetch the valuations of Rs 8 lakh crore.

Earlier a Times Of India report said the company is reportedly looking to restructure its balance sheet to avoid the listing requirement. The report said that if a CIC doesn't have more than Rs 100 crore in assets and doesn't raise public funds or shifts it to a different entity, then it would be out of the purview of RBI and won't be required to list on the bourses.

Reports suggest that the company is looking hive off Tata Capital or restructure its debt to become net debt free. At the end of FY23, company's total debt was over Rs 20,000 crore.

Total revenue of Tata Sons, the unlisted holding company of major Tata group companies, on a standalone basis rose to Rs 35,058 crore in FY 2023 as against Rs 24,132.97 crore in the previous year, a rise of 47 per cent. The company’s profit for the year also rose to Rs 22,132.38 crore for the year from Rs 17,171.21 crore a year ago, a growth of 28.89 per cent. The income of Tata Sons is mainly from tech giant TCS which made a profit of Rs 39,106 crore in FY2023.

In Q4 FY24 results, TCS outperforms its peers -- Infosys and Wipro. Tata Consultancy Services reported a 9.1 per cent growth in its March quarter net profit at Rs 12,434 crore.

In the fiscal year 2023-24, the company’s net profit grew 9 per cent to Rs 45,908 crore. The Tata Group company’s post-tax profit during the January-March period last year stood at Rs 11,392 crore. In the March quarter, its revenue grew 3.5 per cent to Rs 61,237 crore year on year.