Tata Sons likely to make market debut by 2025 to avoid RBI’s ‘upper-layer’ NBFC tag: Report

Tata Group's holding company Tata Sons is reportedly weighing options to avoid being categorised as an upper-layer NBFC (non-banking financial company) by the Reserve Bank of India (RBI). It might have to look at options, such as a stock market listing by September 2025. The company is estimated to be valued at Rs 11 lakh crore. 

On September 14, the central bank released a list of 15 NBFCs, which had Tata Sons' name, in the upper-layer category, requiring higher regulatory compliance, a report in The Times of India said. The central bank has categorised NBFCs into Base Layer (NBFC-BL), Middle Layer (NBFC-ML), Upper Layer (NBFC-UL) and Top Layer (NBFC-TL).

Tata Sons' stock market listing would indeed result in a substantial windfall for its shareholders, including Tata Trusts. Based on an estimated valuation of Rs 11 lakh crore for Tata Sons, a 5 per cent offering could be valued at approximately Rs 55,000 crore, making it one of India's largest public offerings, the report said.

According to news reports, Tata Sons, led by chairman N Chandrasekaran, had earlier explored the possibility of getting an exemption from the RBI, which first issued the list in September 2022.

Under RBI guidelines, NBFC-ULs have to implement a board-approved policy for adopting the enhanced regulatory framework applicable to them and mandatorily list within three years of this.

The RBI has been tightening the regulatory framework for NBFCs after the collapse of IL&FS in 2018. NBFC-ULs will be subject to a more stringent disciplinary structure and have to be more transparent with their financials.

Apart from Tata Sons, its indirect subsidiary, Tata Capital Financial Services, is also included in the list. Tata Sons is merging Tata Capital Financial Services into Tata Capital, which is making itself “listing-ready”. 

Tata Sons, in its FY23 report, 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.”

Besides Tata Sons and Tata Capital Financial Services, LIC Housing Finance, Bajaj Finance, Shriram Finance, L&T Finance, Piramal Capital & Housing Finance, and Cholamandalam Investment and Finance Company are also on the list.

Indiabulls Housing Finance, Mahindra & Mahindra Financial Services, Tata Capital Financial Services, PNB Housing Finance, HDB Financial Services, Aditya Birla Finance, Muthoot Finance and Bajaj Housing Finance are also part of the list.

According to RBI, despite qualifying for identification as NBFC-UL as per scoring methodology, TMF Business Services Ltd (formerly Tata Motors Finance Limited) is not being included in the list of NBFC-UL in the current review due to its ongoing business reorganisation.