Tata Sons, the NBFC holding company of the Tata Group, is reportedly exploring strategic financial measures to avoid the mandatory IPO rule imposed by the Reserve Bank of India (RBI), as per a report in The Times of India. The company is considering a balance sheet rejig, specifically the transfer of debt to a separate entity, to secure an exemption from the RBI-mandated IPO.

Chairman of Tata Sons, N Chandrasekaran, has engaged in discussions with the RBI regarding the potential restructuring. The Chairman Emeritus of Tata Sons, Ratan Tata, has also been briefed on the challenges associated with this restructuring, as reported by TOI.

Under RBI norms, as an upper-layer non-banking finance company (NBFC), Tata Sons is obligated to go public. The central bank had designated Tata Sons as an upper-layer NBFC in the previous year, making it compulsory for the company to initiate the listing process.

A source cited in the TOI report explained that the RBI rules outline an exemption for ‘core investment companies’ (CIC) that do not possess assets exceeding Rs 100 crore and refrain from raising public funds. In such cases, if the company repays or transfers funds to a separate entity, it can effectively bypass the RBI’s listing requirement. This strategy would allow Tata Sons to escape classification as a CIC and ‘upper layer’ NBFC, thus eliminating the necessity for a public listing.

While Tata Sons still has time to comply with RBI rules, it is actively exploring options to transfer its debt to a separate entity, aiming to avoid inclusion in the ‘upper layer’ category, according to the cited source.

In terms of potential IPO details, Spark Capital estimates Tata Sons’ valuation at Rs 7.8 lakh crore upon listing, based on the current market cap of group firms. The listing, if pursued, could simplify the complex group-holding structure of the Tata Group.

Recent news reports suggest that Tata Sons’ IPO size is anticipated to be approximately Rs 55,000 crore. This move comes after Tata Technologies, the last IPO from the Tata Group, entered the market in November of the previous year. Notably, Tata Consultancy Services (TCS) was the last public issue launched by the Tata Group in 2004.

As Tata Sons navigates the regulatory landscape and explore financial restructuring, the potential IPO remains a topic of significant interest, with stakeholders closely monitoring the company’s strategic moves and the evolving landscape of the Tata Group’s financial structure

Please follow Geek Buzz for more such interesting articles.