Tata Sons considering debt restructuring to avoid RBI-mandated IPO
Tata Sons, the $150-billion holding company behind Tata Group, is considering a balance sheet restructuring to avoid a mandatory IPO by September 2025. The company seeks an exemption from a mandate by Reserve Bank of India (RBI) which requires core investment companies (CICs) with assets over Rs. 100 crore and public funds to get listed in the stock market . Currently, Tata Sons is registered as a CIC with RBI and classified as an upper-layer non-banking financial company (NBFC).
Tata Sons is considering transferring debt to a separate entity
To avoid the RBI's rule, Tata Sons is exploring the possibility of transferring its debt to a separate entity, removing itself from the 'upper layer' list. The Times of India reported that this move would prevent the company from being considered a CIC and an upper-layer NBFC, eliminating the need for a public listing. Tata Sons's FY23 report shows borrowings of Rs. 20,000 crore.
Tata Sons may deregister as a CIC from RBI
A CIC is regulated by RBI only if it meets two conditions—an asset size of more than Rs. 100 crore and having raised public funds. If either condition is not met, it is not required to be registered as CIC. Tata Sons has assets worth over Rs. 100 crore and would need to reorganize its debt by repaying borrowings or transferring them to a separate entity, allowing it to deregister as a CIC from RBI.
Impact on already listed Tata Group companies
Yesterday, in anticipation of Tata Sons's potential IPO, three listed Tata Group companies experienced a surge in their share prices. The stocks of Tata Chemicals soared by 14%, Rallis India by nearly 13%, Tata Power by 8.5% and Tata Consumer Products by 3%. Investment banking firm Spark suggested that easiest way to gain exposure to unlocking potential of Tata Sons's stake is through Tata Chemicals. This is because it owns 80% of company's m-cap.
