Mumbai: The Reserve Bank of India (RBI) is said to be agreeable to a restructuring plan proposed by Tata Sons seeking a waiver for the mandatory listing of the group’s holding company. The Tata Group holding company has already implemented parts of the plan, including wiping off debt, said people with knowledge of matter.
The recast will result in Tata Sons not being classified as a non-bank finance company (NBFC) in the ‘upper layer’ (UL) subject to a few regulatory conditions. This, in turn, will imply that Tata Sons won’t be required to list itself on the stock exchanges. In line with the plan, Tata Sons has restructured its balance sheet to be a zero-debt company to be compliant with RBI rules, said the people cited above. Net debt was at Rs 15,200 crore on September 30, 2023, according to the latest Crisil Ratings report. It had standalone cash and cash equivalents of over Rs 2,500 crore.
An RBI circular in October 2021 directed that those companies identified as NBFC-UL should be mandatorily listed within three years. The central bank had classified Tata Sons as an ‘upper layer’ NBFC in 2022, which would have meant a listing by September 2025 if it had not undertaken this restructuring exercise, said the people cited.
Tata Group Valuation
All future funding by Tata Sons for the group businesses will be made from cash reserves, said the people cited above.
RBI and Tata Sons didn’t respond to ET’s queries. The Tata Group has a combined valuation of $400 billion with 26 listed companies. Tata Sons is mindful about its financial impact on the economy and the marketplace, and has been working for the last few months to adhere to the frameworks suggested by the RBI, said an executive close to the development.
Tata Sons had converted itself from a public limited company to a private limited one in 2017. “There had been much internal debate within the Tata Group, and listing was not seen as an option at all, so adhering to norms by restructuring had to be done,” an executive close to the matter said.
Tata Sons is classified as a systemically important NBFC as it ranks among the top 10 large finance companies in terms of its borrowings. According to Spark Private Wealth Management, the market value of Tata Sons’ listed investments is pegged at Rs 16 lakh crore, and that of its unlisted investments at Rs 1-2 lakh crore, counting its forays into semiconductors and batteries.
Tata Sons had also consulted Tata Trusts chairman Ratan Tata before approaching RBI for a waiver. Ratan Tata is also Tata Sons chairman emeritus. The Tata Trusts, philanthropic trusts endowed by members of the Tata family, hold about 66% of Tata Sons. The two biggest trusts are the Sir Dorabji Tata Trust and the Sir Ratan Tata Trust.
