Tata Sons' rejig plan to avoid the Street has RBI's blessings, claims report

The Reserve Bank of India (RBI) has reportedly endorsed Tata Sons' restructuring plan, granting a waiver for the mandatory listing of the conglomerate’s holding company on stock exchanges. The move by Tata Sons signifies a pivotal shift in their corporate structure, aligning with RBI's regulatory framework while sidestepping a public listing, according to The Economic Times.

The restructuring plan, partially executed, notably involves Tata Sons eradicating its debt, underscoring the group's robust financial maneuvering. 

With the restructuring, Tata Sons will no longer be classified as a non-bank finance company (NBFC) in the 'upper layer' (UL), subject to certain regulatory conditions. This classification, designed for NBFCs with systemic importance and significant financial interconnectedness, would have mandated Tata Sons to list by September 2025, following an October 2021 RBI circular. 

The circular stipulated that identified NBFC-ULs must be listed within three years, a requirement Tata Sons will now circumvent through its restructuring efforts.

Related reports highlight the RBI's ongoing interventions in the financial markets, such as selling dollars to prevent the rupee from hitting record lows and tightening liquidity norms, which Moody's has deemed credit positive for banks. These actions reflect the central bank's broader regulatory strategy, within which Tata Sons' restructuring is a notable development.

Tata Sons' balance sheet transformation into a zero-debt entity is a cornerstone of this plan, the report added. ET, referencing Crisil Ratings, noted that as of September 30, 2023, Tata Sons had a net debt of Rs 15,200 crore and cash and cash equivalents exceeding Rs 2,500 crore.

Despite no official comments from the RBI or Tata Sons, the report quoting an internal company source claimed that Tata Group extensively debated the listing issue, ultimately deciding that restructuring was the only viable path to comply with RBI norms without pursuing a public listing. BT could not independently verify the report.