Shapoorji Pallonji Group chairman Shapoorji Pallonji Mistry backs a public listing of Tata Sons as Tata Trusts opposes the move and the holding company begins steps to comply with RBI rules
Shapoorji Pallonji Group chairman Shapoorji Pallonji Mistry has backed a public listing of Tata Sons, calling it a “social and moral imperative” as the Tata Group holding company moves towards compliance with Reserve Bank of India rules.
Mistry, whose group owns about 18.37 per cent of Tata Sons, welcomed the RBI’s decision to reject the company’s application to surrender its registration as a Core Investment Company.
In a statement on Friday, Mistry said he received the RBI decision with “deep respect and profound humility” and thanked the central bank and the government. He also expressed admiration for Prime Minister Narendra Modi’s leadership.
The RBI rejected Tata Sons’ request on September 11 and asked the company to take necessary steps to comply with rules applicable to Upper-Layer NBFCs. The decision has brought the long-running debate over a public listing of Tata Sons back to the centre of attention.
Tata Sons has since decided to move ahead with the regulatory process. Its board has said it will work towards compliance with RBI rules and seek guidance from the central bank, Tata Trusts and other stakeholders.
More from BusinessWhy Tata Sons listing matters
Tata Sons is the main holding company of the Tata Group. It owns stakes in several major Tata companies and controls a large part of the group’s business structure.
The RBI had classified Tata Sons as an Upper-Layer NBFC. Companies in this category face stricter regulatory requirements, including rules linked to public listing.
The latest RBI decision means Tata Sons cannot simply give up its Core Investment Company registration to avoid those requirements. The company now has to work out how it will comply with the applicable rules.
The Tata Sons board on Thursday also approved another five-year term for N Chandrasekaran as executive chairman. The board decided to proceed with the listing process.
The move, however, has exposed differences between the Tata Sons board and Tata Trusts, which owns about 66 per cent of Tata Sons.
Tata Trusts opposes listing
Tata Trusts chairman Noel Tata has opposed the public listing. Tata Trusts said it has not agreed to take Tata Sons public and that all available options should be examined instead of focusing only on a listing.
Noel Tata has also opposed the reappointment of Chandrasekaran. The Tata Sons board nevertheless approved his fresh five-year term.
The disagreement is significant because Tata Trusts is the controlling shareholder of Tata Sons. Any major change in the structure of the holding company will therefore require support from its shareholders.
SP Group also needs liquidity
A public listing could give the Shapoorji Pallonji Group a way to sell part of its Tata Sons holding and raise funds.
The SP Group is the second-largest shareholder in Tata Sons, with a stake of about 18.4 per cent. Its Tata Sons shares have also been used as collateral for borrowings.
The group completed a refinancing exercise of around Rs 21,500 crore in July. It also has a repayment obligation of around Rs 3,500 crore due by the end of September, according to reports.
Against this backdrop, Tata Trusts has proposed another possible route to provide liquidity to the SP Group.
The proposal involves Tata Sons buying back part of the SP Group’s holding through a selective capital reduction. The transaction could generate at least Rs 25,000 crore for the SP Group and would be carried out in two tranches over 18 months.
The proposal would involve shares held through SP Group investment companies and would require the necessary approvals, including from the National Company Law Tribunal.
Mistry seeks closer ties
Despite the differences over the listing, Mistry has called for closer engagement between the SP Group, Tata Sons and Tata Trusts.
He said the development should not turn into a dispute and stressed the need for greater partnership and mutual respect.
Mistry’s support adds another important voice to the debate over Tata Sons’ future. The company now faces a regulatory requirement to comply with RBI rules, while its largest shareholder continues to oppose a public listing.
The next steps will depend on the regulatory process, shareholder approvals and discussions between Tata Sons, Tata Trusts and other stakeholders.
