Board should consider Tata Sons listing amid RBI, SP Group IPO push: Shriram Subramanian

As calls for listing Tata Sons gain momentum, InGovern Founder and Managing Director Shriram Subramanian said the company’s board should consider the move, amid nudges from the Reserve Bank of India (RBI) and its largest shareholder, the Shapoorji Pallonji Group.

Subramanian's remarks followed an ET Now report that the Tata Sons board is likely to meet on June 12 to mull over the company's listing and also consider reappointment of Natarajan Chandrasekaran's reappointment as Chairman.

"...I think there is only so much that Chandrasekaran can do regarding the listing because RBI can push this one and make it compulsory for Tata Sons to list. Two is, the Shapoorji Pallonji Group is always seeking a listing. So, they are the largest shareholder. So, to that extent the board in its prudence should consider the listing itself," Subramanian said in a chat with ET Now.

"I guess in the past board meeting these two points that you touched upon. One is, the losses of the other unlisted group companies, maybe there was not enough data points, so that could be presented in this forthcoming board meeting. Two is, obviously the listing or the not listing of Tata Sons," the InGovern Founder said.

Tata Sons, an upper-layer NBFC is the principal investment holding company and promoter of Tata companies.

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He also commented on why Tata Trusts appears reluctant on getting Tata Sons listed. "I would think definitely Tata Trusts do not want the transparency of Tata Sons. So, to that extent they want it to be unlisted. They do not want to give liquidity to Shapoorji Pallonji Group. So, to that extent they do not want Tata Sons to get listed," Subramanian said.

"So, obviously, listing will entail a detailing of all the unlisted entities which are owned and the financial results and disclosing them, etc, and it may become slightly more onerous on the Tata Sons to sort of channelise its funds and capital allocation will be closely scrutinised. As such, the group is not very well known for capital allocation decisions. So, from that perspective, once it is listed, public shareholders will and analysts will obviously push for greater details on capital allocation, on profitability, path to profitability of the loss-making entities, etc, etc.," he added.

A Tata Trusts resolution passed less than a year ago, aimed to retain Tata Sons as an unlisted private entity, resisting regulatory momentum toward a potential IPO. More recently, Tata Trusts, under the chairmanship of Noel Tata, had asked Tata Sons Chairman N Chandrasekaran to explore all options to avoid a listing, while also initiating discussions on a potential exit for the SP Group.

However, Tata Trusts trustee and former Defence Secretary Vijay Singh recently called for the listing of Tata Sons on the stock exchanges through its initial public offering (IPO), echoing TVS Group’s Venu Srinivasan publicly supported statement, as reported by The Indian Express.

Read more: Tata Sons IPO: After Venu Srinivasan, Tata Trusts Vice Chairman Vijay Singh backs listing of Tata Sons, says report

On Chandrasekaran's reappointment as the Group chairman, Subramanian is of the view that he should get an extension as a 10-year term for a conglomerate of Tata Group's complexity was not good enough.

"I would think there is no reason why they should not give him another term. As such, a 10-year term is not sufficient enough for any CEO of such a complex group to show results. There have been green shoots, of course, in the past 10 years, but more needs to be done," he opined.

InGovern is an independent corporate governance research and advisory firm which assists investors that have financial or reputation exposure to companies.

(Disclaimer: The recommendations, suggestions, views, and opinions given by the experts are their own. These do not represent the views of The Economic Times.)

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