Tata Sons voluntarily surrendered its registration certificate to the RBI last year after repaying debts of over Rs 20,000 crore to remain private.
Going forward, the new venture will be funded primarily by dividends and support from Tata Consultancy Services (TCS), the largest listed salt and software conglomerate, said people familiar with the plan. said.
Tata Sons filed an application to surrender its core investment company registration in March 2024.
This comes as Tata Sons, which is classified as a CIC under the Reserve Bank of India’s size-based regulatory framework, is expected to be listed by September 30, 2025. According to rules laid down by the regulator, top tier NBFCs see Tata Sons’ application to surrender its CIC status as a potential way to circumvent RBI regulations, which could lead to the company’s continued existence. It will be. Private.
Tata Sons has told financiers in sectors such as steel, power, chemicals and technology that the large listed company will function as a holding company rather than a holding company for the group, people with knowledge of the new financing approach said. .
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Tata Sons did not respond to ET’s request for comment.
Traditionally, most of the older listed group companies such as Tata Steel, Tata Motors, Tata Power and Tata Consumer have always managed their own debt, so Tata Sons’ change in stance could have a big impact. Officials said that the likelihood of death was low.
But the businesses Tata Sons has launched in recent years have relied on holding companies to allocate capital. “Once they reach large scale, these companies will also manage their capital requirements,” said the person, requesting anonymity.
Tata Sons is gearing up to make these companies one of its top businesses in the next few years, and the funding for these companies is significant.
comfortable bank
Lenders to industrial companies remain confident in extending credit. Their trust is primarily supported by their beneficial ownership in Tata Sons’ subsidiaries, which acts as an implicit guarantee of support. Bankers say the holding company’s financial stability and large stake in its subsidiaries give creditors peace of mind, even without clear guarantees.
Most large banks allow exposure to Tata at the maximum level allowed by regulators.
“Lenders typically evaluate two important factors when approving a loan: willingness to pay and ability to pay. As far as the Tata Group is concerned, that is guaranteed on both sides,” said a banking industry source. “The Group has a clear ‘willingness to pay’ and its ‘ability to pay’ is evidenced by the significant cash flow generated by TCS and the strong financial base built through its steel and power projects.”
Another important advantage of the Tata Group is that it is not involved in EPC (Engineering, Procurement and Construction) business. This means that the parent company does not have to provide guarantees or consolation fees regarding the execution of the project.
In September 2022, RBI classified Tata Sons as a Non-Banking Financial Company – Upper Tier (NBFC-UL). This classification requires companies to go public within three years. Tata Sons seeks exemption from RBI’s UL classification under NBFC regulatory framework
From March 2023 to March 2024, Tata Sons achieved a significant turnaround in its financial position, moving from a net debt of Rs 20,642 crore to a net cash position of Rs 2,670 crore.
In March 2024, Tata Sons sold 23.4 million shares of TCS and raised around Rs 9,300 crore. Due to stock dilution, the company’s ownership ratio decreased from 72.38% to 71.74%. Officials said the funds were primarily used to pay down debt.
