Tata Sons expects reprieve from IPO deadline amid RBI rule review

By P R Sanjai and Baiju Kalesh

 

Tata Sons Pvt., the closely-held holding company of India’s salt-to-software conglomerate, is not making any preparations for a near-term share sale as it believes the country’s regulators will extend a deadline to take itself public, said people familiar with the matter.

 

Following engagement with officials, the company’s leaders expect it will receive official communication from the Reserve Bank of India granting extension for an initial share sale amid a nationwide review of rules governing entities that are not public-facing and do not require public funds, said the people, who asked not to be named discussing information that’s sensitive.

 

The RBI had earlier classified Tata Sons as a top tier non-banking lender, forcing it to list by September this year.

 

Tata Sons, which is not a customer-facing financial institution, had last year applied to deregister as a Core Investment Company under the shadow bank framework. The company has controlling stakes in over a dozen large listed Tata companies, and is in turn administered by Tata Trusts, a philanthropic arm, with 66% stake in Tata Sons. 

 

While a listing would simplify the complicated holding structure of the Tata Group, taking the company public risks making it a target for takeover — something that Tata Sons directors hold the power to veto in its current form.

 

A representative for the Tata Group declined to comment, while the RBI didn’t immediately respond to an emailed query.

 

However, any delay in a Tata Sons’ initial public offering means the debt-laden Shapoorji Pallonji Group won’t get an opportunity to sell any of the illiquid 18.37% it owns in the Tata holding firm.

 

The 160-year-old conglomerate, which has been struggling with financial stress fueled by the Covid-19 pandemic, was looking to liquidate its stake in Tata Sons as a crucial step to pare debt. 

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Tata Sons cleared all debt from its balance sheet to avoid inclusion in RBI’s 2023 list of top Non-Banking Financial Companies. While the RBI hasn’t yet announced a decision on Tata Sons’ status, Governor Sanjay Malhotra last month hinted at a differential regulatory framework for entities like it.

 

“It is dynamic,” Malhotra had said. “Policies have to change with the times and so it is only in that context that we are going to review some of these policies related to Type-I NBFCs.”