Tata Group Gears Up for India’s Largest IPO: RBI rule increased Ratan Tata’s worries.

Classification by RBI

India’s most prominent industrial conglomerate, Tata Sons, the holding company of the Tata Group, may soon be listed on the stock market. The Reserve Bank of India (RBI) has classified Tata Sons as an Upper Layer Non-Banking Financial Company (NBFC). This classification brings with it a set of stringent regulatory compliances that the company must meet. According to these rules, Tata Sons is mandated to get listed by September 2025.

Financial Highlights

With an estimated value of nearly 11 lakh crore INR, the stakes are exceptionally high. If Tata Sons does decide to go public, it could lead to India’s largest-ever IPO. The previous record-holder is LIC, which brought an IPO worth 21,000 crore INR last year. Tata Sons currently holds about 66% by Tata Trusts and 18.4% by the Shapoorji Pallonji Group, among other shareholders.

What’s at Stake for Ratan Tata?

While the potential listing could offer substantial gains for investors, it does add to the concerns of Ratan Tata, the Chairman Emeritus of Tata Sons. The implications are considerable, given that regulatory mandates could potentially alter the ownership and operational dynamics of the conglomerate.

Exploring Alternatives

Experts indicate that while listing could provide liquidity to Tata Sons’ shares, it might cause complications on the valuation front. Generally, investors apply a discount to holding companies, which could impact the IPO value. However, Tata Sons has ample time to comply with RBI’s conditions and is reportedly exploring other options to evade the NBFC tag.

Subsidiary Inclusion

Along with Tata Sons, its indirect subsidiary Tata Capital Financial Services is also included in the RBI’s list of upper-layer NBFCs. Tata Sons is merging this subsidiary into Tata Capital to simplify its corporate structure, aiming for a more robust capital and asset base.

Tata’s Silence

Both Tata Sons and Ratan Tata have declined to comment on the situation. This move has generated much speculation about how the company plans to navigate the complex regulatory landscape.