The Reserve Bank of India (RBI) has reportedly asked Tata Sons to furnish an undertaking that it will not be involved in any direct or indirect transaction relating to financial services. This comes ahead of the central bank giving the holding company an exemption over listing on the stock exchanges.
Tata Sons had figured among the list of non-banking finance company upper layer (NBFC-UL) companies announced by the RBI in September 2022. The central bank has mandated that firms who come under this category must get listed by September 2025.
To comply with these rules, HDB Financial Services, the HDFC Bank subsidiary, had filed draft papers with the Securities and Exchange Board of India (Sebi) in October.
Tata Sons is not keen on a listing: in the previous fiscal year, it applied to the RBI for voluntary surrender of Certificate of Registration as a Core Investment Company (CIC).
It also repaid close to ₹20,000 crore of debt to avoid getting listed. In March 2024, Tata Sons had sold over 2.3 crore shares of Tata Consultancy Services which garnered more than ₹9,000 crore, used to retire debt.
According to a Moneycontrol report, the RBI has asked Tata Sons to provide an undertaking that after surrendering an NBFC-CIC tag, the company will not be involved in any transaction that involves engaging in financial services.
A loss of CIC status has implications on Tata Sons’ ability to extend guarantee to any of its group firms: it can be done subject to the condition there should be no financial consideration. However, there would be no bar on Tata Sons to offer a guarantee to group entities without charging a fee, the report said.
After voluntarily surrendering the certificate of registration, Tata Sons has stopped the practice of on-lending to group entities.
The Tata holding company has reportedly told the management of group firms particularly the new businesses that they have to independently manage their debts and liabilities and letters of comfort will not be provided to them.
Spark Capital, an equity research firm, had earlier valued Tata Sons ₹7.8 lakh. The listing could lead to simplification of the complicated group-holding structure of the Tatas.
“There are multiple levers of value available from the unlisted investments as the group is entering into new-age segments such as semiconductors (by Tata Electronics)…thus, we believe that the group could derive another ₹1-1.5 lakh crore of value from unlisted investments and step-down subsidiaries such as Tata Technologies, Tata Metaliks and Rallis. Together this can value the holding company at ₹7-8 lakh crore on listing,” a Spark Capital report said.
The valuation was derived by including Tata Sons’ investments across all listed and unlisted companies, equities, preference shares and mutual funds.