Tata Sons IPO’s fate hangs in balance now
RBI yet to take a call on its application to surrender its CIC registration
image for illustrative purpose
Mumbai: Time seems to be fast running out for Tata Sons to list on the stock exchange with the Reserve Bank of India (RBI) yet to take a call on its application to surrender its registration. The RBI has set next September as the deadline for the mandatory public listing of Core Investment Companies (CICs) including Tata Sons. However, Tata Sons has applied to voluntarily surrender its CIC registration. In response to a Right to Information request, which has been seen by Bizz Buzz, filed by an investor, the RBI confirmed on November 14 that Tata Sons submitted its application to relinquish its CIC registration on March 28. “The application submitted by Tata Sons for the surrender of the Certificate of Registration as a CIC is under examination,” said RBI in response to the RTI.
Tata Sons, classified as a CIC under the RBI’s Scale-Based Regulation (SBR) framework, must go public in 10 months to meet the deadline. However, the company’s application to surrender its CIC status was seen as a potential way to sidestep this requirement, allowing it to remain private and avoid public listing obligations.
The SBR framework, introduced in 2022, imposes stricter governance and transparency norms on systemically important non-banking financial companies. As an upper layer NBFC, Tata Sons must adhere to the public listing requirement. Merchant bankers believe a company of Tata Sons would require six to eight months to prepare for an IPO.
Incidentally, Tata Sons has repaid outstanding standalone debts, possibly to facilitate the relinquishment of its RBI registration. If successful, the company would be exempt from SBR listing norms, bypassing the governance and transparency requirements mandated for listed companies.
The RBI’s SBR framework is part of a broader effort to enhance oversight of large financial institutions. Major players such as LIC Housing Finance, Bajaj Finance, and L&T Finance have already made significant strides towards compliance with the SBR framework.
However, the Shapoorji Pallonji Group, which owns 18 per cent stake in Tata Sons, has been a strong supporter for an IPO. At the recent annual general meeting of Tata Sons, Shapoorji Pallonji Group argued that listing of Tata Sons could unlock significant value, enhance governance, improve market liquidity, and increase access to capital. Analysts estimate that even a modest five per cent stake sale could raise over Rs55,000 crore, substantially boosting the company’s financial position and market visibility.
As the deadline looms, analysts feel that the controversy surrounding Tata Sons’ public listing remains a litmus test for the RBI’s ability to enforce its regulatory agenda and uphold governance standards in the country’s financial sector.
Analysts say that Venu Srinivasan is on the boards of both RBI and Tata. Therefore, this is a conflict of interest and it is possible that the IPO is being postponed due to this also.
