The move is part of the company’s broader plans to meet the revised regulatory framework for its subsidiary, Tata Capital Financial Services, as part of the Reserve Bank of India‘s scale-based regulations (SBR).
The central bank, in September 2022, added Tata Capital Financial Services to its list of non-bank lenders in the upper layer under SBR. The firm now must implement a Board-approved policy for adopting the applicable enhanced regulatory framework, and mandatorily list within three years of the central bank classification as an ‘upper layer’ non-bank lender.
The Board will take a call on whether the entity will be listed separately or merged under a holding company, officials close to the development said.
Tata Capital did not comment.
Following the consolidation, there could be some realignment of roles, officials in the know said.
As per the relevant central bank regulations, the board of NBFCs will ensure certain guidelines covering capital requirements, governance standards, and prudential regulations, among others, to be adhered to within 24 months from the date of advice and list the entity within three years. During the transition period, calibrated increments to the business may be allowed through supervisory engagement.Tata Capital has a consolidated book size of ₹94,349 crore as of March 31, 2022, increasing from ₹77,220 crore from the year-ago period. During FY22, Tata Capital recorded a consolidated income of ₹10,253 crore against ₹9,988 in the previous fiscal year. The company’s profit after tax, on a consolidated basis, increased about 46% year-on-year to ₹1,648 crore.
Consolidated return on assets for FY22 was 2%, while the return on equity was 15.6%.
Tata Capital is the holding company for the group’s three lending businesses – Tata Capital Financial Services, Tata Capital Housing Finance, and Tata Cleantech Capital – and three investment and advisory businesses, namely, Tata Securities, Tata Capital Singapore, and Private Equity. Tata Capital Financial Services is registered with the central bank as a systemically important non-deposit accepting non-banking financial company.
Senior officials close to Tata Capital said a digitally focused business transformation strategy has brought down its cost to income from 50% to 36% and helped build a loan book of more than ₹1.1 lakh crore in December 2022.