Tata Sons – Noel Tata has questions, but he must have the answers too

An assurance that Tata Sons will not be listed

Among the various assurances that Noel Tata has sought from Chandra, the first assurance is that Tata Sons would not be listed in the future. RBI had asked Tata Sons to get listed, but the company had later paid off its deposits and managed to avoid getting listed. Listing brings more compliance, and that could also raise the bogey of the Pallonji group pledging Tata Sons shares to raise funds. However, Chandra has underlined that listing of Tata Sons is a regulatory issue and would depend on the interpretation of the RBI. That is clearly one area where Chandra would neither want to give an assurance; not would be able to give an assurance.

An assurance on reduction in debt of the group

To be fair, Tata group has been deleveraging under Chandra. Its debt is still around ₹2.5 trillion, but 35% of the companies have deleveraged in the last few years. Among the bigwigs, Tata Motors halved its debt to ₹62,000 crore. However, Noel Tata is worried about the debt of loss-making companies like Air India where the debt starts to pinch the holding company, as the business unit is already eroding net worth. Noel is also seeking an assurance on strategies to limit debt of the group, but that may not be necessary, considering that there has already been substantial deleveraging across businesses. Chandra has been non-committal on this issue.

An assurance on cutting losses in new ventures

Noel Tata has been referring to the losses made by companies like Tata Digital and Tata Retail (Big Basket), which have been running up huge losses without any significant impact in terms of market share. However, many of these businesses are very long-term investments. They may appear to drain capital today, but they are inevitable if the group has to avoid becoming a dinosaur in the future. Chandra has made it clear that money will have to invested in these new-age businesses till they stabilize. This includes ventures like Tata Semiconductors, which could be a tough road, but is also a billion-dollar opportunity in India. That cannot be missed out.

Noel Tata will have to answer most of these questions

While Chandra could have won the vote, he preferred the tradition of a unanimous vote. However, as the chairman of the key Tata Trusts owning more than 60% of Tata Sons, Noel Tata is seen as the successor to Ratan Tata. Hence, he will have to find the answers to most of the questions raised here. Even his demand for the resolution of the ongoing stand-off with the Mistry group, has to be initiated by Noel Tata. Thirty-five years back, when Ratan Tata took the helm of the group, he made the tough choices, including easing out the regional satraps. Now it is Noel Tata’s turn to answer questions and take the tough decisions. History will judge him on that count!