Proxy firm calls for listing as Upper Layer NBFC
Mumbai: Proxy advisory firm InGovern Research Services on Friday urged the Reserve Bank of India (RBI) to reject Tata Sons’ March 2024 application to surrender its Certificate of Registration as a Systemically Important Core Investment Company, and to direct the group to list as an Upper Layer NBFC by March 2027.
“For a holding company controlling Rs 1.75 lakh crore in assets (including systemic listed companies like TCS, Tata Motors, and Tata Power), SEBI’s listing obligations and disclosure requirements is essential to govern Related Party Transactions (RPTs) and ensure that group-level capital allocation is transparent to the broader market,” it said.
The letter stated that the private status of Tata Sons imposes an ‘artificial holding company discount’ on its listed subsidiaries. By remaining unlisted, Tata Sons denies the 20 lakh + shareholders of entities like Tata Chemicals or Tata Motors the fair market valuation of their indirect holdings, effectively suppressing billions in shareholder wealth.
It cited the recent April 29 clarification from the RBI, where the central bank clarified that funds raised indirectly through group entities cannot be excluded when assessing access to public money. The central bank stated that equity investments flowing from group firms and affiliates, especially those with access to debt markets, must be treated as indirect public funds.
According to InGovern, this clarification definitively strikes down the standalone deleveraging argument Tata Sons has relied upon to justify its exit from core investment company regulatory perimeter.
It said, based on the analysis of RBI’s draft circular on amended eligibility criteria to be classified as an upper-layer NBFC, and further directions issued by RBI on regulatory framework for NBFCs not availing public funds, Tata Sons' application was ‘Dead on Arrival’.
It suggested a three-point prescription-a public rejection of the de-registration bid, a mandatory listing directive, and immediate adoption of a Rs 1 lakh crore asset threshold for Upper Layer classification- is formulated as necessary to preserve regulatory consistency and protect minority shareholders.
The paper cited the examples of other NBFCs such as L&T Finance, Piramal and Tata Motors Finance, where entities either merged into listed vehicles or restructured to comply with SBR norms before deregistration was accepted.
