Tata Sons Eyes RBI Decision On Upper-Layer NBFC Status By March End

In the interim, the Reserve Bank of India, in a release on upper-layer NBFCs on Thursday, said Tata Sons will continue to remain an upper non-banking financial company.

The central bank said Tata Sons' inclusion in the RBI's upper-layer NBFC list is without prejudice to the outcome of its application for de-registration, which is under examination.

This is despite Tata Sons's submission of its application to surrender its core investment company registration this year.

Tata Sons has cleared all debt and reduced guarantees to group finance companies, which is a prerequisite for being de-escalated from categorisation as upper-layer NBFC.

The group believes it is well within the RBI and SEBI guidelines to get de-recognition, said people cited above. They believe the application is still under examination and the group holding company expects a decision by March-end.

In the interim, the Reserve Bank of India, in a release on upper-layer NBFCs on Thursday, said Tata Sons will continue to remain an upper non-banking financial company.

The central bank said Tata Sons' inclusion in the RBI's upper-layer NBFC list is without prejudice to the outcome of its application for de-registration, which is under examination.

This is despite Tata Sons's submission of its application to surrender its core investment company registration this year.

Tata Sons has cleared all debt and reduced guarantees to group finance companies, which is a prerequisite for being de-escalated from categorisation as upper-layer NBFC.

The group believes it is well within the RBI and SEBI guidelines to get de-recognition, said people cited above. They believe the application is still under examination and the group holding company expects a decision by March-end.

In the worst-case scenario, the company has the option to seek extension from the listing timeline as it would involve re-classifying the company from private limited to public limited which could be a time-consuming process.

As per RBI regulation, after being classified as upper layer, an NBFC shall be subject to enhanced regulatory requirements, at least for five years from its classification in the layer, even in case it does not meet the parametric criteria in the subsequent years. The group is committed to meet the enhanced regulator requirement, the people cited above said.

Tata Sons had reduced debt on its balance sheet to negligible by March 2024 before applying for derecognition. The group-listed companies have also cleaned their balance sheet and have manageable debt and healthy cash flows thereby removing dependence on Tata Sons for capital.

Cash flows for Tata Sons have been healthy driven by strong dividends/buybacks from Tata Consultancy Services Ltd. and less capital dependence by all listed companies generating sufficient cash flows for their growth and capex, people said.