Tata Sons – a prominent conglomerate in India, has been classified as an ‘upper layer’ Non Banking Financial Company (NBFC) by the Reserve Bank of India (RBI). This classification comes with a mandate that Tata Sons must list its shares on the stock market within three years of the notification. On September 14, 2023 RBI announced this classification for 15 financial companies, including Tata Sons. This development has significant implications for Tata Sons and its stakeholders.
All About Tata Sons’ IPO
The forthcoming initial public offering (IPO) of Tata Sons is poised to be a game changer in the Indian stock market. With an estimated valuation of ₹11 lakh crore, Tata Sons’ IPO which would involve the offloading of 5% of its shares, is expected to be one of the largest public issues in India’s financial history.
While the RBI guideline stipulates that an ‘upper layer’ NBFC must list within three years, there is another option available to Tata Sons. According to Saurabh Jain, Vice President of Research at SMC Global Securities, Tata Sons could consider a company reorganization to exit the ‘upper layer’ NBFC list. However, the likelihood of Tata Sons proceeding with the IPO is high ; given the favorable response that even large-sized IPOs have received from investors, thanks to ample liquidity in both primary and secondary markets.
Understanding RBI’s Mandate
RBI’s directive requires non-listed ‘upperlayer’ NBFCs to initiate the listing process within three years of receiving the classification. This entails stricter regulatory compliance for these companies post classification.
Conclusion
Tata Sons’ impending IPO listing represents a significant development in India’s financial landscape. With its estimated valuation and the potential size of the IPO, it could become one of India’s largest ever public issues. The decision to go public will likely be influenced by various factors, including market conditions and the Tata Group’s strategic considerations.