Tata Sons Listing
As per the RBI’s SBR rules i.e. scale-based regulation, Tata Sons will have to list on the stock market by September next year. The RBI initiated these guidelines in September 2022 and top-tier NBFCs will be listed within three years. However, Tata Sons had requested the RBI for exemption from this listing, on which all eyes are fixed.
The introduction of SBR was an important step by the RBI to improve corporate governance and reduce risks after the collapse of IL&FS, a leading NBFC in the country. This regulatory framework mandates listing of top-tier NBFCs, with the aim of ensuring accountability and mitigating risks.
Plan to raise Rs 55,000 crore
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Media reports indicate that Tata Sons is planning to raise Rs 55,000 crore through an initial public offering (IPO), recently following this news the share prices of Tata group companies had surged. These companies including Tata Chemicals, Tata Motors and Tata Steel have substantial equity in Tata Sons and have made huge profits. However, Tata Sons’ decision to ask for a discount has led to a fall in its share price, disappointing shareholders who were expecting returns from the IPO.
Reason for Tata Sons exemption appeal
One possible reason behind Tata Sons’ appeal for exemption could be its concern about revealing the preferential treatment given to its owners. Tata Sons is controlled by public charitable trusts, which may run afoul of trust laws that prohibit such ownership structures. Moreover, Tata Sons’ articles of association provide Tata Trusts with significant control over board decisions. This is not permitted in listed companies.
Why is Tata Sons exempt?
All other top-tier NBFCs, including Bajaj Housing Finance, Aditya Birla Finance and L&T Finance, comply with the listing norms prescribed by the RBI. Exempting Tata Sons could set a disturbing precedent. This could weaken the regulatory framework and distort the level playing field in India’s capital markets.
The stock market capitalization is 5 trillion
The country’s stock market capitalisation has reached $5 trillion, ranking it fifth globally. This expansion reflects the growing share of retail investors, who now hold around 10% of the market through some 2,500 listed companies. The Reserve Bank of India (RBI) plays an important role in maintaining market stability through regulation, liquidity control and supervision.
