MUMBAI: Even as Tata Sons board members remained divided on the reappointment of N Chandrasekaran as chairman, they were unanimous on the need to form a committee to examine options for complying with RBI’s regulations for upper-layer NBFCs, people aware of the matter said. People privy to the discussions said there was no resolution on an IPO at Thursday’s board meeting and no vote by directors on the matter. But Tata Sons directors across the board agreed that a team with representatives from Tata Sons, Tata Trusts and independent external members would need to engage with the central bank, Tata Trusts and other stakeholders to evolve a roadmap for compliance.The decision followed questions from Tata Trusts chairman and Tata Sons director Noel Tata on how the company intended to proceed and explore avenues to avoid a public listing. RBI rules require upper-layer NBFCs with assets above Rs 1 lakh crore, or with direct or indirect access to public funds, to list. Tata Sons had assets of Rs 2.01 lakh crore as of March 31, 2026, double the threshold.
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The decision taken was that the proposed committee’s findings and recommendations would be presented to the board for consideration, following which an appropriate course of action will be determined. Noel also communicated to the board that the RBI regulations that require upper-layer NBFCs, a category in which Tata Sons falls, to list allow such entities to exit the regulatory framework if they voluntarily restructure their operations.However, a corporate restructuring expert pointed out that merging an operating Tata company such as TCS with Tata Sons could help it exit RBI’s upper-layer NBFC framework but may erode its valuation premium as investors grapple with whether to value it as an IT company or a conglomerate holding company.The other option is to split Tata Sons into two entities, which could alter its regulatory classification and potentially remove the requirement for an IPO. Barring Noel Tata, the rest of the Tata Sons board believes compliance with RBI’s regulations would entail a mandatory stock market listing after the central bank rejected Tata Sons’ application to voluntarily surrender its certificate of registration, which had been pending for more than two years.A public listing is expected to unlock value for shareholders, especially the Shapoorji Pallonji Group, Tata Sons’ largest minority investor, while giving the holding company of the Tata Group greater access to capital for businesses such as aviation that require significant investment. But Tata Trusts does not favour a public listing of Tata Sons. Noel Tata told the board that the company would need at least three years to prepare for an IPO if one ultimately becomes unavoidable, citing the extensive corporate, financial and regulatory work involved, including changes to its articles of association, shareholder approvals, financial restatements and due diligence.He also pointed to the capital commitments and losses at businesses such as Air India and Tata Digital, as well as long-term investments in semiconductors and electronics manufacturing, saying a public issue at this stage could be detrimental to both the company and its shareholders.
