Tata Sons Board meet on May 8: Inside Tata Trust dispute over listing - Details on RBI’s shadow bank rule

According to a recent Bloomberg report, while Noel Tata is opposed to taking Tata Sons public. This is creating discord as trustees Venu Srinivasan and Vijay Singh are likely to advocate for the holding company to make the transition to the listed space.

Financialexpress.com could not confirm the news independently. We have reached out to Tata Group. We will update you as soon as we hear from them.

Why the difference over Tata Sons IPO?

According to Bloomberg, two of the six trustees at Tata Trusts — the charitable group that control around two-thirds of Tata Sons — believe that a listing would bring greater transparency and discipline to the conglomerate’s parent company.

This marks a departure from the Trusts’ earlier stance. The development also highlights the challenges that Noel Tata — a great-grandson of founder Jamsetji Tata — is facing in consolidating his influence over the group more than a year after taking over following the death of Ratan Tata, his late half-brother.

Tata Sons: What the RBI circular implies

This difference of opinion comes as the Reserve Bank of India tightened oversight of what it considers systemically important shadow banks. Under new rules that will come into effect on July 1, the RBI will designate Tata Sons as a shadow bank, which would ultimately require it to be publicly listed.

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

That option 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 categorising shadow lenders as systemically important if their asset size exceeds Rs 1 trillion ($10.6 billion).

Noel Tata reportedly opposed Tata Sons’ listing push

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 Bloomberg.

But Noel Tata, has been so opposed to the idea that he even demanded that the chairman of Tata Sons, N 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, according to Bloomberg, will also focus on the appointment of new nominees by the charities to the Tata Sons board. Many industry observers believe that this could be a strategic move for Noel Tata.

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, Bloomberg reported.

RBI unlikely to grant Tata Sons exemption from listing norms: Reports

The RBI, however, has informally conveyed to the Tata trustees that it’s unwilling to make an exception for the conglomerate, according to Bloomberg. 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, noting it could complicate the regulatory landscape and set a bad precedent.

Shapoorji Pallonji Group may emerge biggest beneficiary of Tata Sons IPO

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.