Tata Sons listing will come as a big breather to the Mistry family

The Reserve Bank of India’s move to reject Tata Sons’ voluntary surrender of its core investment company registration has come as a shot in the arm of the Shapoorji Pallonji Mistry family.

In a letter, dated September 11, to Tata Sons, Sudarsana Sahoo, the chief general manager, Department of Regulation at the Reserve Bank of India Central Office in Mumbai, rejected Tata Sons application to be exempted from the core investment company (CIC) category.

The regulator said it had examined all aspects of Tata Sons request for voluntary surrender of its CIC registration and found that its request for voluntary surrender of certificate of registration for being classified as an unregistered CIC “cannot be acceded to”.

“As such, we advise you to take necessary actions to ensure full compliance with all guidelines/instructions, as applicable to NBFC-Upper Layer (UL) issued by the RBI, immediately," states the letter, a copy of which was seen by Fortune India.

SP Group under financial stress

Shapoorji Pallonji & Company Pvt Ltd, the flagship company of the SP group, has been facing severe financial stress with over ₹19,600 crore in debt (both short and long-term loans), as of March 2026. The company has a diversified business presence across engineering & construction, infrastructure, real estate, water, energy and financial services.

Around 40% of the company’s debtors were due for more than six months (a sizeable portion of these pertain to the receivables from an arbitration award, which was won by the company and recovery proceedings are underway), while sizeable funds were blocked in contract assets, resulting in working capital intensity of 10.7%, stated a ICRA rating report in May 2026.

According to the rating agency, while liquidity in the flagship company had seen some improvement, supported by the absence of repayment obligations until September 2027 (following prepayment of the ₹1,500 crore term loan by March 2025 using proceeds from the stake sale in Sterling & Wilson Renewable Energy Limited) and partial sanction of working capital limits; weak operational cash flows continue to constrain liquidity, necessitating promoter support.

The company’s ability to sustain improvement in operating profitability and rationalise its working capital cycle remains crucial from a cash flow perspective and will be key monitorables, ICRA had mentioned in its May 2026 rating update.

Though the company’s order-book stood at ₹25,300 crore as on September 30, 2025, providing medium-term revenue visibility, its liquidity position was constrained owing to weak operating cash flows from its core EPC operations coupled with the high working capital intensity.

In this context, the Mistry family was looking at monetising a part of its stake in Tata Sons after the group had sold some other business verticals.

RBI had retained Tata Sons in UL-NBFC list

The Mistry family, through Sterling Investment Corporation Private Limited and Cyrus Investments Private Limited, hold 9.19% each in Tata Sons, making up for the cumulative holding of 18.38% in the holding company.

There were reports that in the absence of a direct listing, Tata Sons could explore a share swap arrangement, exchanging Mistry family holdings in the unlisted holding company for shares in listed group entities.

With the RBI now mandating a direct listing, that scenario is no longer expected to materialise. The RBI had first classified Tata Sons as an upper layer non-banking financial company, NBFC, in September 2022, requiring it to list within three years. The deadline lapsed in September 2025 without a listing.

Tata Sons had applied in 2024 to surrender its CIC registration after clearing its debt, a request that remained pending. The RBI, however, retained Tata in its upper layer NBFC list without prejudice to the pending application, leaving the listing question unresolved until Friday's letter.

The development comes weeks after Tata Sons Chairman N. Chandrasekaran told the board he would not seek a third term when his tenure ends in February 2027. In the letter, he mentioned that one board member was opposed to his reappointment as chairman and that the matter had been on hold for six months.

Tata Trusts chairman Noel Tata had raised questions over the performance of certain group companies at a Tata Sons board meeting in February when Chandrasekaran's renewal had come up for discussion. Tata Trusts, which holds 66% percent in Tata Sons, passed a resolution last year opposing a listing and has sought to have Tata Sons engage with the RBI to resist it.

Mistry sought RBI guidance

Early this year, Shapoorji Pallonji Mistry in a media release had stated: “We would like to reiterate that a timely listing of Tata Sons is not merely a regulatory compliance but a necessary evolution. One that will reinforce corporate governance, deepen transparency, and accountability. These form the very foundation of the Tata Group. To date, no clear, evidence-based case has been presented to explain how a public listing would materially damage the interests of the trusts or reduce their ability to serve beneficiaries.”

Besides, a listing will unlock value for millions of retail shareholders, create a more defined and robust dividend stream for the Tata Trusts, and expand the social and philanthropic impact that benefits the poorest sections of our country, mentioned the statement.

“We look towards the Reserve Bank of India for a decisive direction with regards to the listing. We repose full faith in the Government of India and the Reserve Bank of India to act decisively,” Mistry had said in the statement.