Tata Sons’ IPO, which runs a huge group of companies that do everything from making salt to selling high-end cars, is at the centre of the disagreement.
People who know about the situation say that Noel Tata’s resistance to going public with the main company of his family business is causing problems at the top of one of India’s most famous conglomerates.
Two of the six trustees at Tata Trusts, a group of charities that owns two-thirds of Tata Sons Pvt., are going to suggest that the holding company of the group get ready for a listing in line with India’s central bank rules, said people who did not want to be named because the talks are private.
Venu Srinivasan and Vijay Singh are expected to push for Tata Sons to make this change at the May 8 meeting of the Tata Trusts board, according to sources.
India’s central bank is taking steps to tighten control of what it calls “systemically important shadow banks.” These moves show that differences are growing at the top levels of the $180 billion company. This also shows how hard it is for Noel, who is the founder’s scion and great-grandson, to get stronger control over the group more than a year after taking over from his late half-brother.
When asked for views, people from Tata Trusts, Tata Sons, and the Reserve Bank of India did not reply right away. Singh and Srinivasan also didn’t say anything about what they were going to do at the next board meeting.
Tata Sons’ IPO is at the heart of the disagreement
Tata Sons is a group holding company that runs a huge number of businesses that do everything from making salt to selling high-end Jaguar Land Rover cars and giving global IT services. The RBI will call Tata Sons a “shadow bank” under new rules that go into effect July 1. This will eventually force the company to be traded.
The RBI has already forced Tata to list before. In 2022, it labelled Tata Sons as a “upper-layer” non-banking financial company and gave it three years to go public. But the group was able to stay secret by reorganizing its debt and asking RBI to classify it as a non-systemic organization.
That gap seems to be closed now, as the most recent RBI memo says Tata can’t try to de-register as a shadow lender because it doesn’t directly take money from people and businesses.
The RBI also suggested that shadow lenders should be considered systemically important if their assets are worth more than 1 trillion rupees ($10.6 billion).
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Tricks to Delay
Trustees at Tata Trusts are now wondering if the group would be better off doing an IPO instead of trying to delay the listing, as the listing is going to happen anyway.
But Noel, the patriarch who runs the Trusts, has been so against the idea that he even asked Natarajan Chandrasekaran, the chairman of Tata Sons, to promise that the holding company wouldn’t have to go public when Chandrasekaran’s reappointment for a third term was being talked about, Bloomberg News reported in February.
As soon as Chandrasekaran refused to give that promise, the Tata Sons board put off voting on whether to re-name him. There were also differences in how much money some business groups lost.
The split started because Noel wants to show that he is in charge of the parent business. People who know will say that the meeting on May 8 will also be about naming new candidates for the Tata Sons board by the charities. This is a smart move that will help Noel have even more control over the group’s future.
The approaching due date adds to the stress. People who know the situation say that Tata Sons is waiting for oral advice from the regulator while it decides whether to ask for more time to follow the rules. The rules go into effect in less than two months.
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Not an exception
People who know about it say that the RBI has told the Tata trustees privately that it won’t make an exception for the company. They said that the regulator had already asked a lawyer for advice on the case and sent that advice to the federal government for final review.
People said that any exceptions given to Tata Sons would lead to similar requests from other groups. They also said that it could make regulations more difficult and set a bad example.
If Tata Sons has to go public, the Shapoorji Pallonji Group, which owns a big chunk of the company, will probably come out on top. The building company has promised to use its 18.4% share in Tata Sons to get expensive debt. It has openly supported a listing, saying that it is a step that needs to be taken to get value.
The Bloomberg Billionaires Index says that Shapoor Mistry and his family are worth $32 billion, but almost 75% of this is tied to their stake in Tata Sons, which can’t be sold right now.
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