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Tata Sons needs a public listing, not a reprieve

Listing Tata Sons will bring much-needed market scrutiny to major group investments like Air India while aiding all stakeholders.

Some corporate developments are the result more of regulatory pressures than enlightened internal thinking. A case in point is the Reserve Bank of India’s (RBI’s) decision last week (11 September) to reiterate its view that Tata Sons, the most important Tata group holding company, is an upper layer non-bank financial company. Thus, it would have to list itself on the stock exchanges.

While the Tata Trusts, which hold two-thirds (66 percent) of the shares in Tata Sons, have been reluctant to list the company, other minority shareholders like the Shapoorji Pallonji Mistry (SP) group are keen on it, since this is the only way for the group to unlock value from its 18.4 percent holdings in Tata Sons. The fact that some companies in the SP group have been facing serious debt repayment problems has added a degree of urgency to the need to leverage their Tata Sons holdings.

While the RBI has filed a caveat in the Bombay High Court to ensure that it is heard before Tata Sons is given any kind of reprieve, the Tatas would be well-advised to actually start the process of listing since it is in their own broader interest. While holding companies have no general need to list, especially if they are closely-held by promoters, in Tata Sons’ case, its majority shareholding is with trusts who use the cash generated to do charity work. This makes Tata Sons more than just a holding entity as the promoter entities (the Tata Trusts themselves) would benefit as much from closer market scrutiny as the minority public shareholders. Charities cannot really decide how companies should be run, and some market scrutiny of Tata Sons’ capital allocation policies would help.

Tata Sons was a low-profile group holding company till the 1990s, with small shareholdings in group companies. When Ratan Tata took........

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