Tata Sons – The sooner it gets listed, the better it would be

Tata Trusts, the single largest shareholder in Tata Sons, is going through a battle of Trust. For years, its meetings were low-profile and based on total consensus. In the last one year, the dissent and differences are out in the open.

Who has greater say in Tata Trusts board

This remains one of the key issues as it entails control over the highly valuable Tata Sons. Tata Sons has an interesting shareholding pattern, with more than 50% of the shares held by the Dorabji Tata Trust and the Ratan Tata Trust combined. There is an additional 14% that is held by smaller Tata Trusts. The second biggest shareholder in Tata Sons after the Tata Trusts (combined) is the Shapoorji Pallonji group, which holds about 18.3% in Tata Sons. Some of the key people like Noel Tata and Mehli Mistry are already related to the Shapoorji Pallonji family. Considering the stakes involved, the focus will be on who has a greater say in the affairs of Tata Sons, on the board of Tata Trusts.

Listing of Tata Sons on the exchanges

When Tata Sons was classified as an “Upper Layer” NBFC, in September 2022, they were automatically liable to come out with an IPO by September 2025. However, Tata Sons had then repaid all its deposits and filed an exemption request with RBI on the grounds that it was just a CIC, and not a deposit taking NBFC. While the RBI is yet to take a final decision, listing is something Noel Tata is strongly against. However, others like Shapoorji Pallonji are in favour of listing Tata Sons shares as it would bring about greater transparency. Also, for the deeply debt-ridden SP group, listing of Tata Sons helps them monetize their stake, which is valued at close to ₹3,10,000 crore today. Stakes are surely high!

Bridging the rift with the SP group

Another bone of contention in the Tata Trusts has been the need to sort out the differences with the SP group. After all, they are among the two most powerful Parsi business families in India. For years, the Tata Group and the SP group worked in tandem. Things changed after the ouster of Cyrus Mistry from Chairmanship of Tata Sons. Some Tata Trusts are of the view that it is essential for the two groups to again work closely together so that they can jointly protect the interests of the group. This is again a subject on which the Trust board is deeply divided. A listing could hit two birds with one stone, as it offers SP group a market-driven exit and allow Tatas to consolidate.

Actually, Tata Sons should opt for listing

As of now, the RBI is yet to take a final call on Tata Sons listing. If RBI decides that Tata Sons has to list, then there is not much of a choice. However, there are benefits to getting listed. After all many other holding companies like Bajaj Holdings, JSW Holdings, and Pilani Investments are already listed entities in the market. The issue of confidentiality is also not truly relevant. Companies in defence and technology deploy confidential strategies, despite being listed entities. Listing will not only position the group as being highly transparent (something the group is known for), but also automatically offer an exit route to SP group. That would be two birds with one stone.