The two major shareholders of Tata Sons – Tata Trusts and the Shapoorji Pallonji (SP) group — are heading towards a closure on hammering out a peace formula that could give an exit route to the latter. Sources familiar with the developments said the Tatas are looking at allowing a partial exit to the SP group, which holds 18% stake in Tata Sons and is the second largest shareholder after the Trusts which hold 66% stake. FE had first reported on October 1 that the two sides have stepped up talks on this issue.
In case such an agreement is finally agreed upon, the SP group could withdraw their persistent demand for listing of Tata Sons, which is the holding company of India’s largest private conglomerate.
The Tata Trusts board meeting on Friday could informally discuss this option, though it is not in the formal agenda that is focused on additional funding for philanthropic work. The final decision will of course have to be taken by the Tata Sons board, but the Trusts have a significant say over the decisions made by Tata Sons. The board meeting is being held in the backdrop of tension among the trustees over governance and decision-making issues.
The SP group has been battling debt issues – Rs 30,000 crore at last count – and has been demanding an exit for quite some time. The Tatas, however, have been opposed to listing of Tata Sons, which led to simmering tensions between the two sides. A partial exit, sources said, would be a good option for both sides.
Another possible mechanism to resolve the dispute will be for Tata Sons to buy back its shares in case there is no listing. But it is a time consuming process.
Ahead of the annual general meeting on August 14 this year, Tata Sons chairman N Chandrasekaran had met Shapoor Mistry, the chairman of the SP group, to discuss the way forward. This was immediately after the Noel Tata-led Tata Trusts directed the Tata Sons chairman to consider all options so that the holding company of the Tata group stays private. The Trusts also asked him to facilitate SP group’s exit from the group. There have been several rounds of talks between the two since then on a viable route.
The talks have of late gained pace after the Reserve Bank of India made it clear that it is not opposed to Tata Sons’ request for deregistration of its upper layer non-banking financial company (NBFC) status, provided Tata Trusts, which owns 66.8% stake in Tata Sons, and the SP group, which is the second largest shareholder in the conglomerate, present a unified face on keeping Tata Sons as a private entity. The regulatory deadline for upper layer NBFCs to go public has already expired, but the regulator is believed to be open to giving some more time to both the parties to come to a unanimous decision on the issue. “If both of them agree to Tata Sons not going private and seek withdrawal of the NBFC tag, the RBI would have no problem.
Tata Sons has sought relaxation from the listing norms on the ground that as a private limited company, it is not obliged to comply with the RBI’s listing guidelines.
Tata Sons has already met almost all the regulatory conditions to remain an unlisted company. In August 2024, it surrendered its NBFC licence after paying back all its debt and turned a cash-positive company by March 2024—the most important criterion to be private company under the RBI norms for large non-banks. Tata Sons had repaid over Rs 20,300 crore in debt between March 2023 and March 2024, leaving only a small amount of non-convertible debentures and preference shares, and thus meeting one of the main conditions to remain a private, closely-held company, which provides it with greater strategic flexibility and control over its operations.