The Reserve Bank of India's (RBI) new mandate is driving a wave of initial public offerings (IPOs) among non-banking financial companies (NBFCs). Following Bajaj Housing Finance Ltd.'s upcoming IPO, three other major NBFCs—Tata Capital Financial Services Ltd., HDB Financial Services Ltd. (the NBFC arm of HDFC Bank Ltd.), and Aditya Birla Finance Ltd. are expected to go public within a year to meet RBI's listing requirements.
Investment bankers have identified these firms as likely candidates for IPOs. Sachin Mehta, Director of Investment Banking at Anand Rathi Advisors, noted that the strong market demand for high-quality businesses, coupled with the need to meet RBI regulations, will likely lead to more NBFCs pursuing listings. This move will help these companies continue raising funds for growth post-listing.
According to RBI guidelines, Tata Sons, Tata Capital Financial Services, Piramal Capital and Housing Finance, HDB Financial Services, and Aditya Birla Finance must list within the year as they are categorized as 'upper layer' NBFCs. Piramal Capital and Housing Finance is preparing to merge with Piramal Enterprises, and Tata Sons' potential IPO could significantly impact the market by offering considerable opportunities for investors, analysts suggest.
The Tata Sons listing could draw substantial domestic and international interest, given its status as the holding company of one of India's largest conglomerates. Dharmesh Mehta, CEO of DAM Capital, described a Tata Sons IPO as a landmark event for India’s equity capital markets, predicting strong investor interest. However, Tata Sons has reportedly sought to voluntarily surrender its registration certificate with the RBI, possibly to avoid the mandatory listing.
The RBI's response to this request will be closely watched. The RBI's revised scale-based regulation (SBR) framework, introduced in October 2021, categorizes NBFCs into four layers—base, middle, upper, and top—based on their size, activities, and risk levels. Upper layer NBFCs are required to list within three years of being designated as such. As of the latest update, there are 15 upper layer NBFCs, with nine already listed and Bajaj Housing Finance preparing to list. This leaves three firms, including Tata Sons, that still need to go public.
Bajaj Housing Finance’s IPO, worth ₹6,560 crore, is scheduled to open on September 9. This offering is part of the RBI's regulations that mandate upper layer NBFCs to list by September 2025. According to V K Vijayakumar, Chief Investment Strategist at Geojit Financial Services Ltd., the market would benefit from more high-quality IPOs like Bajaj Housing Finance to balance the currently overheated mid and small-cap segments.