On 11th September, RBI issued a
letter rejecting a long-pending application from Tata Sons to voluntarily
surrender its registration as a core investment company. This has a huge impact
on the Tata Group’s ownership structure and, perhaps, the future of the group
itself. Before getting into the nitty-gritty of the storm it subsequently triggered
at the Bombay House, let us first understand the unique architecture of Tata Group
companies.
Tata Sons is the privately held principal investment holding company and promoter of 31 Tata Group companies, including TCS, Tata Motors, Tata Steel, Titan, Indian Hotels, Tata Capital, Tata Power, Tata Consumer Products, Tata Chemicals, Tata Global Beverages, Tata Investment Corporation, etc., besides unlisted companies in critical sectors such as aerospace and defence, electronics and semiconductor manufacturing. Each of these publicly listed Group companies operates independently under the supervision of its own board of directors. As of March 31, 2025, the aggregate market capitalisation of 26 publicly listed Group companies stood at around $328 billion.
About sixty-six per cent of the equity share capital of Tata Sons Pvt Ltd is held by philanthropic trusts, viz., Sir Dorabji Tata Trust (SDTT), the Sir Ratan Tata Trust (SRTT), and a few other similar Tata family trusts. These trusts, which receive dividends from Tata Sons, support education, health, livelihood generation and art and culture. The only outside stakeholder in Tata Sons is the Shapoorji Pallonji (SP) Group, which owns around 18.37% equity stake through its investment companies, Sterling Investment Corporation and Cyrus Investments. The rest of the equity is held by Tata Group companies (12.86%) and a few other Tata family members (2.87%).
This being the peculiar structure of Tata
Sons, in March 2024, when Ratan Tata was alive, its board had considered the
question of public listing and unanimously decided that it should remain
unlisted. Accordingly, it proactively prepaid ₹
21813 crore in debt during 2024 to become “debt-free” and claim the qualification
for deregistration as a Core Investment Company (CIC). It is this request for
deregistration that the RBI has now rejected, directing Tata Sons to comply
with the regulatory framework applicable to an upper-layer non-banking
financial company, which means it must go for public listing.
As the Tata Trusts, majority stakeholders of Tata Sons, are wrestling with this new challenge, Tata Sons board that met on 17th September passed two resolutions backed by a majority of four directors’ votes: One, to initiate steps to comply with the applicable RBI Upper-Layer NBFC guidelines, and two, to reappoint N. Chandrasekaran as the Executive Chairman for a fresh five-year term. But Noel Tata, Chairman of Tata Trusts and the nominee director of the Trusts on the board of Tata Sons, was the only one who voted against these two resolutions.
The board meeting brought out the deep-rooted discord between the Tata Sons board and its principal shareholder, Tata Trusts, into the open. Indeed, this meeting was labelled as acrimonious and unseemly. Noel Tata is reported to have said in a note to the Board that RBI “does not mention listing. It prescribes no particular step, and it does not say that the company is in breach. What its legal effect is, and what it requires of this company and by when, are questions upon which this board has formed no view”. He is for exploring all the available alternatives, for he believes that going public will destroy the century-old character of the group's holding company, dilute the philanthropic mandate of Tata Trusts, and shift executive focus from long-term institution building to short-term stock market pressures.
The Tata Trusts have also described that as per the provisions of the Articles of Association of Tata Sons, the resolution to reappoint Chandrasekharan as Chairman, with four directors voting in favour and Noel Tata against it, was ab initio illegal. For, as per the Articles of Association, appointment or reappointment of a Chairman requires a majority affirmative vote from the Tata Trust nominee directors. In the instant case, Noel Tata, Nominee Director of the Trusts, voted against the resolution while Venu Srinivasan, another Nominee Director of the Trusts, voted in favour. Hence, there is no majority concurrence from the nominee directors for the resolution. Trusts also argue that the absence of majority concurrence cannot simply be overridden by the ‘casting vote’. That aside, this resolution raises a fundamental question: When the nominee director of the largest shareholder lacks confidence in the prospective Chairman, can he take crucial decisions? Will he have smooth sailing?
Intriguingly, there remain two more questions, which merit readers’ attention. The first is: Why did Mr Chandrasekharan change his stance within a month of announcing that he would not seek a third term, given the lack of unanimity on the board? This perhaps needs to be made known to the Tata Group companies that employ over a million people globally for good order’s sake. Similarly, in 2024, when Ratan Tata was alive, the Tata Sons board unanimously decided that it should remain unlisted. Fast forward to September 17, 2026, the same directors voted in favour of taking steps toward listing of Tata Sons. More striking is that when the SDTT and SRTT unanimously resolved in July 2025 that Tata Sons should remain unlisted, Venu Srinivasan, as one of the trustees, supported the resolution, and the same was communicated to Tata Sons for necessary action. Yet on September 17, he backed the board’s decision to take steps towards listing Tata Sons.
Reports indicate that these
issues may head to Court, but legal battles would only delay solutions, and prolonged
battles are certain to harm the interests of the Group as a whole. Listing is
indeed more likely to affect the nimbleness of any holding company. In the
instant case, it may even shift the board’s focus from the founding fathers’
philosophy of philanthropy to immediate earnings to meet the expectations of
new shareholders. At the same time, listing also helps the investment company
raise capital and allocate it efficiently, which would, in turn, benefit trusts
by boosting their philanthropic activity. Nevertheless, balancing these demands
is a big challenge. Still, the House of Tatas, being what it is known for, is
sure to live up to its 158-year legacy of good governance, stability, and
honoring the Trusts’ philanthropic philosophy.
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