RBI norms may force Tata Sons to consider mega IPO

After Tata Technologies, the first initial public offering (IPO) listing by the Tata group in over 19 years, made a blockbuster debut in November last year, the group is considering the option of a mega IPO before September 2025 in the wake of stringent Reserve Bank guidelines for non-banking finance companies.

With an estimated valuation of Rs 11 lakh crore, Tata Sons is reportedly looking to sell 5 per cent in the IPO, which makes up to about Rs 55,000 crore, according to a report by a broking firm. 

The last time such a big IPO hit the market was the LIC IPO, which was worth Rs 21,000 crore.

Tata Trusts, headed by Ratan Tata, holds 66 per cent stake in Tata Sons. 

As the Pallonji Mistry group holds 18.4 per cent stake in the company, the Mistry group stake is likely to be valued at Rs 198,000 crore.

The Tata Group has over 100 operating companies across the sector. 

The RBI framework categorises NBFCs in Base Layer (NBFC-BL), Middle Layer (NBFC-ML), Upper Layer (NBFC-UL) and Top Layer (NBFC-TL).

The RBI circular dated October 22, 2021, directed that NBFC-UL should be mandatorily listed within 3 years of identification as NBFC-UL. 

Disclosure requirements should be put in place on the same lines as applicable to a listed company even before the actual listing, as per Board approved policy of the NBFC, the RBI said.

The RBI published the list of 16 upper layer NBFCs on September 30, 2022. 

The upper layer NBFCs will comprise of those NBFCs which are specifically identified by the Reserve Bank as warranting enhanced regulatory requirement based on a set of parameters and scoring methodology.

The top ten eligible NBFCs in terms of their asset size shall always reside in the upper layer, irrespective of any other factor.

Tata Sons, which is listed at the fourth position, is the only core investment company in the RBI list.

NBFCs of the Birlas, Bajaj, the Piramals and the Mahindras are in the ‘upper layer’ list.

The RBI is apparently not in favour of relaxing the listing requirement for one entity as others will rush to the central bank for a similar favour.