Tata Sons listing latest news: How RBI Governor Sanjay Malhotra's first public comment dispels doubts on Sept 11 order
RBI Governor Sanjay Malhotra has justified the classification of Tata Sons as an upper-layer NBFC, saying that any large NBFCs or core investment companies that handle public funds or leverage a group's balance sheet need to be registered with the central bank and follow the requisite listing norms.
Large NBFCs and core investment companies (CIC) like Tata Sons and others are required to be registered with the RBI because of the systemic risks, because they sit on top of group companies where they leverage funds and they use the balance sheets of the group companies to return those funds, he said at the NDTV World Summit on Friday.
"So, the funds of the public, whether it is through corporate bonds, banks and other means, that is at risk...so, it is for these reasons that these CICs, or NBFCs, are required to be registered," he said.
CICs that do not have direct or indirect access to public funds are exempt from the registration requirement, he said.
"As long as it is an NBFC within our definition, it is a CIC, it has access to funds, direct or indirect, it's required to be registered, and if it is in the upper layer, then it is required to list," he said.
Last month, the RBI rejected Tata Sons' application to surrender its non-banking finance company (NBFC) licence, which will force a public listing of the holding company of the salt-to-software conglomerate Tata Group.
This makes a public listing of Tata Sons imminent as it qualifies as an upper layer NBFC, which must mandatorily list on the stock exchanges.
Tata Sons was placed in the upper layer in September 2022. It had applied in March 2024 to surrender its registration, and had repaid its debt in an effort to qualify for deregistration.
The Tata Sons board has since moved ahead with steps linked to a possible public listing, while saying it will examine other options amid a deepening row within the conglomerate.
Malhotra reaffirmed the central bank's primary objective is maintaining price stability with inflation targeting while supporting long-term economic growth.
The Tata Sons board has been split over the holding company going public. At a board meeting on September 17, four directors voted in favor of initiating the public listing process, while Noel Tata, the Chairman of Tata Trusts, which holds ~66% of Tata Sons, opposed it.
Noel Tata, on the other hand, has proposed an alternative arrangement, where unlisted entities like Tata Electronics and Tata Consulting Engineers are merged into Tata Sons. This would result in a financial reclassification of the parent company and thereby avoid the mandatory public listing rule.
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