Tata Sons gears up for potential IPO following upper-layer NBFC classification

Tata Sons, the parent company of Tata Group, has been recently classified as an ‘upper-layer’ Non-Banking Financial Company (NBFC) by the Reserve Bank of India (RBI), setting the stage for a potential initial public offering (IPO) by September 2025. The RBI’s guidelines mandate that an ‘upper-layer’ NBFC must list within three years of receiving this classification.

The RBI issued this classification to 15 financial companies, including Tata Sons, on September 14, 2023. Another Tata Group entity, Tata Capital Financial Services, also received the ‘upper-layer’ NBFC classification but will reportedly not require listing due to its planned merger with Tata Sons.

The IPO could potentially make Tata Sons India’s largest listed company. Currently valued at approximately ₹11 lakh crore, if Tata Sons decides to offload 5% of its shares through this IPO, the size could be around ₹55,000 crore. This would dwarf the previous record held by Life Insurance Company (LIC), which launched an IPO worth Rs 21,000 crore on May 17, 2022.

However, there is speculation that Tata Sons may not have to launch an IPO at all. Saurabh Jain, Vice President of SMC Global Securities, suggested that if Tata Sons manages to exit the RBI’s NBFC upper layer list through reorganization, it would not need to list.

The recent classification as an ‘upper-layer’ NBFC means these firms will require more stringent and greater regulatory compliance. Apart from Tata Sons and Tata Capital Financial Services, other companies that received this classification include LIC Housing Finance, Bajaj Finance, Shriram Finance, L&T Finance, Piramal Capital & Housing Finance among others.

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