Beginning Thursday, there will be a series of remembrance events marking the first death anniversary of Ratan Tata who passed away on this day last year. He would obviously be missed forever, but the larger Tata family, comprising the employees, customers and other stakeholders would miss him more for the unfortunate discord at Tata Trusts which has a significant say over how Tata Sons, the group’s holding company operates.
Tata Trusts, with its 66% stake in Tata Sons, have been known to be fiercely protective about their turf. Being the guardian of a 156-year old group, it is to be expected. So much so that any investment or key decision exceeding even Rs 100 crore requires the approval of Tata Trusts (which includes Sir Dorabji Tata Trust and Sir Ratan Tata Trust, among others).
But the past decade has seen the biggest shareholder of the old group getting mired in controversies. After the ugly spat to remove former chairman Cyrus Mistry played out in 2016, the latest infighting involving chairman Noel Tata and Venu Srinivasan on one side versus Mehli Mistry, Pramit Jhaveri, Jehangir HC Jehangir, and Darius Khambata on the other, over board appointments and governance issues has landed up in the government’s court – something that has never happened before.
Mistry is a formidable name because he was a close associate of Ratan Tata despite being a part of the larger Shapoorji Pallonji family, which owns about 18.37% of Tata Sons – the holding company of the Rs 15.24 lakh crore group. In fact, he sided with Ratan Tata during his battle with Cyrus Mistry who was his cousin brother. And, according to reports, Mehli feels that he is being left out of key decision making after Noel Tata became chairman of Tata Trusts.
What has sparked the dispute is the Mistry faction’s rejection of a resolution re-appointing 77-year-old Vijay Singh, former defence secretary, as nominee director on Tata Sons board. Singh’s appointment came up for vetting as he had crossed the age of 75. Following the death of Ratan Tata in October 2024, Tata Trusts introduced a policy requiring annual reappointment of nominee directors on the Tata Sons board once they turn 75. Singh, subsequently, voluntarily resigned from the Tata Sons board.
At the same time, when the Mistry faction sought to nominate Mehli Mistry to the Tata Sons board, Noel Tata and Venu Srinivasan opposed the move.
Further, reports suggest that the Mistry-led camp has reportedly rejected all three candidates proposed by Noel Tata for the Tata Sons board. They include well-known lawyer Behram Vakil, Tata Steel Managing Director TV Narendran and veteran banker Uday Kotak. The Tata Sons board currently has six members due to three recent vacancies: the retirement of Ralph Speth (ex-JLR chief), the expired term of industrialist Ajay Piramal, and the retirement of ex-UTI chief Leo Puri.
Another big contentious issue between the Trusts and Shapoorji Pallonji group has been the listing of the Tata Sons as an upper layer core investment company (CIC). With the Reserve Bank of India’s (RBI) deadline ending on September 30 and the SP Group seeking a listing so that it can liquidate some of its stake, there is still a lack of clarity over the next step of the group.
For the SP Group, fundraising through dilution of their holdings is important because of its rising debt burden. Earlier this year, it refinanced almost Rs 30,000 crore of debt at close to a whopping 20%. If the group’s holding is partially bought back by Tata Trusts and Tata Sons, it will be help reduce the debt by almost 50%
A truce between the SP Group and Tata Trust seems to be on the cards. A settlement involving Tata Group entities buying part of the SP Group’s stake in Tata Sons will help provide with the much-needed liquidity without listing the holding firm – a situation that the SP Group may agree to. With the next Tata Trusts board meeting to be held on October 10, there are expectations that things will get sorted between the two warring factions.
The rift within the group has India Inc worried as well. As Harsh Goenka, Chairman, RPG Enterprises tweeted on October 6 “The Tatas are an institution that defines India’s corporate soul. Any internal discord hurts Brand India itself. The government should immediately intervene and support the Tata family restore harmony and ensure the Trusts continue their extraordinary work.”
Reports say that even the Home Minister Amit Shah, in a meeting with the trustees on Tuesday asked the factions to do things the ‘Tata way’ that relies on decades of consensual decisions to avoid any adverse fallout of the rift between the two factions on the operations of Tata Sons.
In addition, the attempts of four trustees of Tata Trusts to undermine chairman Noel Tata’s authority and assume greater powers in the running of Tata Sons have not gone down well with the government. Worse still, the fact that the trustees of the country’s best known group had to seek government intervention to resolve internal issues is an embarrassment.
It is unfortunate that in less-than-a year of Ratan Tata’s passing, the group finds itself in a situation that the guardians are at loggerheads with each other. To quote him, “None can destroy iron, but its own rust can.” For its own sake and the interests of millions of Tata group company shareholders, the rust should be cleaned up soon.