MUMBAI: The Indian banking regulator’s refusal to exempt Tata Sons Pvt from a public listing-rule comes as an unexpected blow for group patriarch Noel Tata, who’s already struggling to address leadership uncertainty at the top of the US$185bil conglomerate.
The chairman of Tata Trusts, which owns 66% of Tata Sons, was caught off guard by the Reserve Bank of India’s (RBI) decision to quash the group’s hopes of avoiding an initial public offering (IPO), said people familiar with the matter.
His aides are now evaluating a myriad of options to fight the decision, the people said, asking for anonymity to discuss private matters.
For about two years, Tata Sons representatives had petitioned RBI to remove it from the bucket of systemically-important shadow lenders, which are mandatorily required to list.
Noel, 69, eschews the idea of listing Tata Sons as this would fundamentally alter the Trusts’ control over Tata Sons and its leadership, bringing tighter regulatory oversight and investor scrutiny on the group’s internal dealings, the people said.
The workarounds being discussed include whittling down Tata Sons’s balance sheet to less than the threshold that triggers the mandatory IPO requirement or even splitting Tata Sons into two, they added. These options are expected to be discussed at a crucial Tata Sons board meeting scheduled for Thursday.
Reflecting the volatility that RBI’s surprise decision has thrust the company into, some board directors may even pitch that Natarajan Chandrasekaran, the current Tata Sons chairman, stays past his term that ends in February in order to steady the ship, the people said. The Economic Times reported this possibility on Sunday.
Chandra, as he’s widely known, said last month that he would exit in February after months of friction with Noel over the listing issue, as well as capital allocation within the sprawling Tata Group.
Representatives for Tata Sons and Tata Trusts didn’t immediately respond to a request for comment outside of regular business hours.
A 15-member team from Chandra’s office had in fact begun IPO preparations in May, the people said, when an RBI circular revived the pressure to list.
If those preparations are sufficiently advanced, the people added that Chandra may tell the board that Tata Sons can be ready to list by February.
The cascade of consequences is an unprecedented challenge to Noel’s leadership, which is still largely untested since he took over as Tata Trusts chairman in 2024 after half-brother Ratan Tata’s death.
The instability that will accompany a public listing may also affect politically important projects spearheaded by the group, including India’s efforts to build up a semiconductor chip-making operation, and revive its national carrier Air India.
The group already spans a wide range of sectors from making salt to software and luxury sedans.
“This is absolutely one of Noel Tata’s biggest challenges,” Abizer Diwanji, founder at NeoStrat Advisors LLP said, adding how Tata Group’s absolute sway over its companies has never been questioned before.
“People have challenged maybe leaderships, but not the Tatas’ control overall.” — Bloomberg
