Tata Sons should begin IPO process after RBI setback, says InGovern Research

New Delhi [India], September 16 (ANI): Tata Sons should begin the process of listing on the stock exchanges after the Reserve Bank of India (RBI) rejected its application for deregistration, according to a report by InGovern Research.
InGovern said the Tata Sons board should use the current situation to take an institutional decision on regulatory compliance, capital structure and the interests of various stakeholders, instead of pursuing prolonged litigation or alternative structures to remain unlisted.
It stated, “The RBI’s rejection of the deregistration application has brought the listing question to the centre of the Group’s agenda…. The time has come for the Board of Tata Sons to bell the cat and begin the process of listing Tata Sons in the best interests of all stakeholders”.
Tata Sons, the principal holding company of the Tata Group, had applied in March 2024 to surrender its registration after strengthening its balance sheet and repaying more than Rs 21,000 crore of debt.
According to the report, now the RBI has rejected the deregistration application and required Tata Sons to comply with the regulatory framework applicable to upper-layer non-banking financial companies (NBFCs).
The RBI has also filed a caveat in the Bombay High Court indicating that it intends to be heard before any interim relief is granted in a possible legal challenge.
Against this backdrop, InGovern has argued that Tata Sons should move towards an initial public offering (IPO).
The report said a listing would bring greater transparency and price discovery for Tata Sons and could benefit the large shareholder base of listed Tata group companies that hold shares in Tata Sons.
It stated “A listing of Tata Sons Limited will directly and indirectly benefit the 1.77 crore shareholders of Tata group companies that hold shares in Tata Sons”.
It said a public listing could also provide liquidity to non-Trust shareholders, including the Shapoorji Pallonji Group and listed Tata group companies.
The report also highlighted the potential for greater capital flexibility. According to the report, a listed Tata Sons could raise debt and equity, use listed shares for acquisitions and joint ventures, and fund new initiatives without relying only on internal accruals.
The report also said a listing could bring greater scrutiny to the special rights held by Tata Trusts and improve transparency around corporate governance.
The report noted that Tata Trusts hold a controlling economic interest in Tata Sons and have veto rights over board appointments and certain strategic matters. It said these rights would need to be reviewed against minority shareholder protection, board independence, related-party safeguards and applicable listing requirements once Tata Sons becomes listed.
The report also pointed to the large public-market footprint of the Tata Group. Collectively, listed Tata group entities account for more than Rs 25 lakh crore in market capitalisation, according to InGovern.
The research firm said Tata Sons' decisions affect listed and unlisted companies, public shareholders, employees, lenders, strategic partners and new businesses, making transparency and accountability important.
The Tata Sons Board is scheduled to meet on September 17. InGovern said the meeting should address the RBI's decision, the potential listing timetable, appointment of legal and investment-banking advisers, the future of Tata Trusts' special rights, liquidity for non-Trust shareholders and leadership continuity.
The report acknowledged that listing could increase disclosure requirements, market pressure and compliance costs, and could raise concerns around commercially sensitive information. However, it said these issues could be managed through appropriate disclosure and governance frameworks. (ANI)