Noel Tata’s resistance to IPO creates discord in board of Indian conglomerate

Their case, according to the people, is that a listing will bring necessary transparency and rigor to the conglomerate’s parent. That’s a departure from the Trusts’ previous position of resisting a public float due to concerns that a listing would dilute its control over the group’s listed companies. Noel still wants to keep Tata Sons closely held, they added.

The actions indicate that deep disagreements are emerging at the highest levels of the $180 billion conglomerate as India’s central bank takes steps to tighten oversight of what it considers systemically important shadow banks. This also illustrates the challenges that Noel, the scion and a great-grandson of the founder Jamsetji Tata, faces in solidifying his power over the group more than a year after he took over from his late half-brother.

Representatives of Tata Trusts, Tata Sons and the Reserve Bank of India did not immediately respond to requests for comments. Singh and Srinivasan also did not comment on their plans for the upcoming board meeting.

At the center of the rift is the initial public offering of Tata Sons, the group holding company controlling a vast collection of companies that do everything from manufacturing salt to selling luxury Jaguar Land Rover vehicles and providing global IT services. Under new rules that go into effect July 1, the RBI will designate Tata Sons a shadow bank that will ultimately require it to be listed.

It’s not the first time that the RBI has required Tata to list — in 2022, it classified Tata Sons as an “upper-layer” non-banking financial company with a three-year time line to go public. But the group managed to stay private by restructuring its debt and petitioning RBI that it be classified as a non-systemic entity.

That loophole appears to have closed now, with the latest RBI circular preventing Tata from trying to de-register as a shadow lender on the grounds it doesn’t directly accept funds from individuals and institutions.

The RBI separately proposed categorizing shadow lenders as systemically important, if their asset size exceeds 1 trillion rupees ($10.6 billion).

Delay Tactics

Now, trustees at Tata Trusts are questioning whether the delay tactics are worth the trouble given the listing is inevitable, and whether the group would be better off doing an IPO, according to the people.

But Noel, the patriarch who heads the Trusts, has been so opposed to the idea that he even demanded that the chairman of Tata Sons, Natarajan Chandrasekaran, give an assurance that the holding company won’t have to list when the latter’s reappointment for the third term was being discussed, Bloomberg News reported in February.

When Chandrasekaran declined to give that guarantee, the Tata Sons board deferred the vote on his reappointment. There were also differences over financial losses in some business units.

The rift has emerged as Noel seeks to assert his authority over the holding company. The May 8 meeting, the people said, will also focus on the appointment of new nominees by the charities to the Tata Sons board — a strategic move that will help Noel consolidate his influence over the group’s future direction.

The looming deadline adds pressure. With less than two months before the rules kick in, Tata Sons is awaiting informal guidance from the regulator while weighing whether to seek more time to comply, the people said.

No Exception

The RBI, however, has informally conveyed to the Tata trustees that it’s unwilling to make an exception for the conglomerate, according to the people. The regulator has already sought legal opinion on the matter and forwarded its view to the federal government for final review, they said.

The view is that any exemption to Tata Sons will trigger similar demands from other entities, the people said, noting it could complicate the regulatory landscape and set a bad precedent.

If Tata Sons is forced into an IPO, the Shapoorji Pallonji Group, a substantial minority shareholder, will likely be the biggest winner. The infrastructure conglomerate has pledged its 18.4% stake in Tata Sons to raise costly debt. It has publicly backed a listing — calling it a necessary step to unlock value.

Shapoor Mistry and family are valued at $32 billion by the Bloomberg Billionaires Index but nearly 75% of this net worth is tethered to their Tata Sons stake, which is currently illiquid.

–With assistance from Advait Palepu.