Will RBI's NBFC Tweak Hand Tata Sons A Listing Reprieve?

RBI I Tata Sons IPO: India's central bank has finalised guidelines on upper-layer non-banking financial companies (NBFC), reigniting hopes that Tata Sons could get a relief from its listing obligations after RBI dropped a provision defining the "indirect receipt of public funds".

This clause, included in the April draft had been viewed as a key hurdle for business conglomerates seeking to no longer be classified as a core investment company (CIC).

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To be considered as a CIC, a company must meet two requisites - a large share of its assets must be in shares or debentures of group entities, and it must have access to public funds, which basically encapsulates money sourced, directly or indirectly, from either banks, public deposits or public financial institutions.

Meanwhile, Tata Sons in terms of asset size still qualifies as an upper-layer NBFC, room for reasonable doubt what this could mean for the future this salt-to-software business house.

Under the revised framework, any NBFC with assets of more than Rs 1 lakh crore will automatically be classified as an upper-layer NBFC.

In April draft, the Reserve Bank of India had said indirect receipt of public funds translated into funds received not directly but through associates and group entities which have access to public funds.

Further, experts noted that the ongoing speculation linked to the future of Tata Sons is hinged on RBI's ruling on the Tata Sons application to deregister as an NBFC. The other key factor under consideration would be if the company's investments it holds were originally bought using public funds or using money via sources such as group-company equity with no such link. Therefore the pertinent query remains on how RBI interprets 
the utilisation of public funds, directly or indirectly."