RBI rejects Tata Sons' bid to surrender NBFC licence, paves way for public listing

The Reserve Bank of India on Saturday rejected Tata Sons' application to surrender its non-banking finance company (NBFC) licence, paving the way for a public listing of the holding company of the Tata Group.

In a letter received by the company's Company Secretary and Chief Financial Officer on Saturday, the RBI said Tata Sons did not meet the necessary criteria for deregistration, PTI reported citing sources. The company had applied to surrender its NBFC licence in March 2024.

The rejection means Tata Sons is now required to pursue a public listing as it is classified as an upper-layer NBFC, a category that is required to be listed on stock exchanges.

The RBI's decision makes a listing of Tata Sons more likely, although the company will have to take the necessary steps to comply with the listing requirement.

The RBI was yet to respond to requests for comment. Tata Sons also did not immediately respond to the development.

The development comes as the $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.

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.

Other issues flagged by Noel Tata included the losses being incurred by the group's other businesses, including 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 ₹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 ₹1.75 lakh crore, reportedly underwent major changes to prevent listing, including a deleveraging exercise.