NEW DELHI: The mega listing of Tata Sons is likely to get delayed as the holding company of $150 billion salt-to-steel conglomerate is exploring ways to get an exemption from current IPO norms for upper-layer non-banking finance companies (NBFC-UL).
According to reports, Tata Sons could consider re-organising its debt structure by repaying its existing debt or transferring it to a separate entity. By doing this, it won’t have the compulsion to become a publicly listed firm by September 2025. Tata Sons is registered as a Core Investment Company (CIC) and is categorised as a non-banking finance company upper layer (NBFC-UL) by the Reserve Bank of India (RBI).
A CIC’s main business is the acquisition of shares and securities. As per the Reserve Bank of India rule, a CIC should hold 90% or more of its net assets in the form of investment in equity shares, preference shares, bonds, debentures, debt or loans in group companies. The component of equity holdings should not be less than 60% of their assets. A CIC can be categorized as upper layer or middle layer NBFC.
The existing RBI rule notes if a CIC has assets worth less than Rs 100 crore and does not raise public funds, it can avoid being classified as a CIC or an ‘upper layer’ NBFC. In this case, they aren’t required to go for a public listing.
At the end of FY23, Tata Sons had a borrowing of about Rs 20,000 crore while its assets are more than Rs 100 crore. Its holding in listed Tata companies is pegged at Rs 16 lakh crore. This leaves Tata Sons with the choice of restructuring its debt to avoid being a CIC and overcome the three year mandatory listing norm
The RBI in September 2022 had come up with a list of NBFCs, in which Tata Sons and Tata Capital were classified as upper-layer NBFCs. As per the current norms, an NBFC-UL has to become a
listed company within three years of identification as NBFC-UL. This means Tata Sons and Tata Capital will have to launch an IPO by September 2025 if they continue to remain in the upper layer category or aren’t given an exemption.
V Prashant Rao, Director and Head Equity Capital Markets, Anand Rathi Investment Banking, said with the central bank mandating Upper Layer NBFCs to list within a three year period of identification, Tata Sons has till September 25 to get itself listed.
“Tata Sons may look at other options too to avoid an IPO, but an IPO certainly helps unlock value and simplify the group structure. Whatever the valuations are, and if at all they plan an IPO, it will be one of the biggest in Indian capital market history,” added Rao.
Equity Research firm Spark Capital has pegged Rs 7.8 lakh crore valuation for the Tata group’s NBFC holding company Tata Sons. Tata Trusts holds a 66% stake in Tata Sons, while Pallonji Mistry group has about an 18.4% stake.
