The Reserve Bank of India's rejection of Tata Sons' NBFC licence
surrender application paves the way for an imminent public markets
listing of the conglomerate's holding company, marking a significant
development for the Indian business landscape.

The Reserve Bank of India (RBI) has rejected Tata Sons' application to
surrender its non-banking finance company (NBFC) licence, forcing a
public listing.

Tata Sons is classified as an upper-layer NBFC, which mandates its
listing on stock exchanges by October 2025.

The decision has significant implications for the holding company of
the vast Tata Group conglomerate, potentially increasing transparency
and investor pressure.

Internal divisions exist among Tata Sons' shareholders regarding the
listing, with Tata Trusts reluctant and Shapoorji Pallonji Group
pushing for it.

Leadership challenges and losses in other group businesses like Tata
Digital and Air India have also been flagged internally.

The Reserve Bank has rejected Tata Sons' application to surrender its
non-banking finance company (NBFC) licence, which will force a public
listing of the holding company of the salt-to-software conglomerate
Tata group, sources said on Saturday.

In a letter received by the company secretary and chief financial
officer on Saturday, the RBI specified that the group does not meet
the necessary criteria, leading it to reject the March 2024
application for deregistration.

Mandatory Listing for Upper Layer NBFCs : This makes a public listing of Tata Sons imminent as it qualifies as an upper layer NBFC, which must mandatorily list on the stock exchanges.

A response was awaited from the Reserve Bank when reached out for
comment. Tata Sons also did not respond immediately to this
development.

The development comes as the USD 170 billion Tata Sons is still facing
leadership challenges and a divided board, which led Chairman N
Chandrasekaran to opt out of reappointment when his term ends in
February next year.

Internal Divisions and Transparency Concerns
It is a divided house even among the shareholders, with the Noel
Tata-led Tata Trusts, a string of non-profits holding over 65 per cent
of Tata Sons, being reluctant to list, while Shapoorji Pallonji Group,
its largest private shareholder with around 18 per cent holding, is
publicly pushing for the group to list.

According to experts, a listing will compel the group to be more
transparent about all its affairs, including capital allocation, and
investor pressure will lead to demands for financial returns, making
long-term bets difficult.

As per news reports, the issue of listing the business was also among
the reasons which led Noel Tata to vote against the reappointment of
Chandrasekaran.

The half-brother of Ratan Tata, who chairs Tata Trusts and is a member
of the Tata Sons board, wanted a commitment from Chandrasekaran to
ensure that Tata Sons is not forced to list, while the latter is
learnt to have opined that the outcome of a regulatory or legal matter
cannot be ascertained.

Broader Business Challenges : Other issues flagged by Noel Tata included the losses being incurred by group's other businesses including the Tata Digital and Air India, which were either launched or acquired during Chandrasekaran's nearly decade-long stint at the helm.

The RBI had come out with a list of 15 entities, classifying them as
Upper Layer NBFCs and mandating them to list by October 2025.

Earlier this year, it had expanded the list to include government-run
NBFCs as well and also announced that any NBFC with over Rs 1 lakh
crore of assets will automatically qualify as an upper-layer NBFC.

However, a decision on Tata Sons' plea to surrender its core
investment company NBFC license was kept pending, and the RBI brass
repeatedly parried a clear answer regarding the holding company's
listing.

Tata Sons, which has assets of over Rs 1.75 lakh crore, reportedly
underwent major changes to prevent listing, including a deleveraging
exercise.