Tata Sons has made a strategic move by repaying over ₹20,000 crore in debt, allowing it to remain a closely held entity and avoid the mandatory listing of its shares on the stock exchange, as per Reserve Bank of India (RBI) regulations. The company’s decision to repay its debts and surrender its registration certificate to the RBI underscores its commitment to maintaining its unlisted status, according to a report by The Economic Times.
This significant debt repayment of ₹20,300 crore has notably reduced Tata Sons’ liabilities, leaving only ₹363 crore in non-convertible debentures and preference shares. To further cement its position, Tata Sons deposited ₹405 crore with the State Bank of India (SBI) and submitted an undertaking to the RBI as part of its strategy to relinquish its registration certificate.
In September 2022, the RBI classified Tata Sons as a Non-Banking Financial Company – Upper Layer (NBFC-UL), a designation that typically requires companies to go public within three years. This classification was given due to Tata Sons’ status as a core investment company that raises funds through borrowing from banks and markets to invest in its group companies. According to RBI regulations, an NBFC-UL must list its shares on the stock exchange within three years of receiving this classification.
However, by taking decisive steps to lower its promoter risk profile through substantial debt repayment, Tata Sons has effectively eliminated the need to list its shares. This move not only helps Tata Sons retain its operational privacy but also shields it from the potential volatility and scrutiny associated with public listings. Consequently, the company has opted to surrender its certificate of registration to the RBI, thereby securing its status as an unlisted entity.
The company’s financial performance has also been noteworthy. For the financial year ending March 2024, Tata Sons reported a robust 57 percent increase in net profits, reaching ₹34,654 crore. During the same period, the company’s revenues surged by 25 percent, climbing to ₹43,893 crore from ₹35,058 crore in the previous year. This impressive growth highlights Tata Sons’ ability to generate substantial returns despite the financial challenges that prompted the debt repayment.
In addition to the revenue growth, Tata Sons achieved a significant reduction in its total expenses. The company’s expenses dropped by 27 percent in FY24, decreasing to ₹2,776 crore from ₹3,794.70 crore in FY23. This reduction in expenses, combined with the increase in profits, reflects Tata Sons’ strategic focus on efficiency and financial discipline. The return on equity, before exceptional items and tax, stood at an impressive 38.15 percent for FY24, underscoring the company’s strong financial standing.
The repayment of debt and the decision to remain unlisted align with Tata Sons’ long-term strategy of maintaining a controlled and stable operational environment. By avoiding the mandatory listing, Tata Sons can continue to operate without the pressures and constraints often associated with public companies, such as heightened regulatory requirements, market expectations, and shareholder pressures.
Tata Sons’ strategic move to repay over ₹20,000 crore in debt and surrender its registration certificate to the RBI has allowed it to sidestep mandatory listing requirements, maintaining its status as a closely held company. This decision reflects Tata Sons’ focus on financial stability and operational control, positioning it well for continued growth and profitability.
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