Mumbai:Tata Sons, the holding company of the $150-billion Tata Group, has approached the Reserve Bank of India (RBI) requesting an exemption from the mandatory Initial Public Offering (IPO) requirement.
This comes a month after the company raised over Rs 9,000 crore by selling its stake in Tata Consultancy Services (TCS).
According to a report from Times Of India, in its recent proposal to RBI, Tata Sons highlighted a significant reduction in its debt levels. The company aims to completely eliminate its debt to avoid being categorised as an “upper layer” Non-Banking Financial Company (NBFC), which would necessitate a public listing under RBI’s regulations.
As per Tata Sons’ financial report for FY23, the company had a total debt of Rs 21,909 crore and cash and bank balances of Rs 451 crore. Over the last year, its debt levels have reduced significantly.
In October, Tata Sons raised Rs 9,362 crore (approximately $1.1 billion) by selling shares of its key revenue-generating subsidiary, TCS. The proceeds were used to pay off loans to both domestic and international lenders.
When contacted, Tata Sons declined to comment on the matter, and the RBI did not respond to queries at the time of publication.
Avoiding the IPO requirement
Tata Sons, which is classified as a Core Investment Company (CIC) under RBI regulations, is required to go public by September 2025. However, the company, which is controlled by public charitable foundations under Tata Trusts, has been exploring ways to bypass this requirement.
Under RBI rules, a company must meet two criteria to maintain its CIC status: it must have assets exceeding Rs 100 crore and hold public funds. If either condition is not met, the company can no longer be classified as a CIC.
Tata Sons’ assets, which primarily consist of investments in operational companies like TCS, Tata Motors, and Tata Steel, are valued at over Rs 1.3 lakh crore according to its FY23 report. The company is now aiming to retire its borrowings entirely, which would allow it to deregister as a CIC and avoid the IPO mandate.
Strategic move to restructure status
By eliminating its debt and deregistering as a CIC, Tata Sons can sidestep RBI’s rules requiring it to be listed as an “upper layer” NBFC. This strategy aligns with the company’s 2017 decision to transition from a public to a private company during a leadership conflict between then-chairman Cyrus Mistry and Tata Trusts.
Meanwhile, Tata Sons’ subsidiary, Tata Capital Financial Services, is preparing for an RBI-mandated IPO, even as its parent company seeks to avoid a similar obligation.
