The Tata Sons board will meet on Thursday against an unusually turbulent backdrop, with the Reserve Bank of India’s (RBI’s) listing directive, Chairman N Chandrasekaran’s planned exit and divisions within Tata Trusts converging at Bombay House.
Two issues are expected to dominate: Tata Sons’ response to the RBI’s rejection of its application to surrender its core investment company registration, and leadership continuity after Chandrasekaran said he would not seek another term when his tenure ends in February 2027.
People aware of the developments said Thursday’s meeting may not settle every question. But the board will be pressed to establish a direction—seek reconsideration from the RBI or prepare for a challenge, resist listing or begin planning for it, and start a succession search or persuade Chandrasekaran to stay.
They said Tata Trusts Chairman Noel Tata is likely to convey to the board that Tata Trusts wants the company to exhaust all available options before taking legal recourse against the RBI. These could include asking the central bank to reconsider its decision and seeking clarification of its September 11 communication, which did not spell out the reasons for rejecting the application.
Tata Sons had applied for deregistration in March 2024 after repaying more than Rs 21,000 crore of debt and strengthening its balance sheet. Deregistration would have allowed it to avoid the listing requirement applicable to upper-layer non-banking financial companies.
The RBI classified Tata Sons as an upper-layer NBFC in September 2022, requiring it to list within three years. Its rejection of the deregistration application has brought the listing question back to the boardroom.
Tata Trusts, which collectively owns about 66% of Tata Sons, has opposed a listing. The Shapoorji Pallonji group, with an approximately 18% stake, supports one as a means of securing liquidity.
The issue has also exposed differences within the Trusts and between their two nominee directors on the Tata Sons board. Noel Tata opposes listing, while Tata Trusts vice-chairman Venu Srinivasan supports it. A listing could affect the Trusts’ special rights and subject Tata Sons’ finances, investments and capital allocation to greater public scrutiny.
The leadership question is similarly complicated. Chandrasekaran informed directors in August that he would not seek a third term. The formal process of choosing his successor, however, faces a procedural hurdle.
Under Tata Sons’ articles, a five-member selection committee recommends the chairman. Three members must be jointly nominated by the Sir Dorabji Tata Trust and Sir Ratan Tata Trust (SRTT), while the Tata Sons board nominates one member and selects an independent outsider.
SRTT is currently unable to convene trustee meetings because of proceedings before the Maharashtra Charity Commissioner. The stalemate prevents the principal Trusts from making their joint nominations and could delay the succession process.
Against this backdrop, the Tata Sons nomination and remuneration committee is likely to recommend that Chandrasekaran continue, people aware of the matter said. Directors could ask him to reconsider, arguing that leadership continuity is important while Tata Sons deals with the regulatory and governance implications of a possible listing.
Proxy advisory firm InGovern on Wednesday urged the board to begin the listing process, saying Tata Sons had “outgrown the governance model of a private, closely held holding company”.
It said directors should address the RBI decision, a listing timetable, the appointment of legal and investment-banking advisers, the Trusts’ special rights, liquidity for non-Trust shareholders and leadership succession.
InGovern recommended obtaining formal legal and regulatory advice, conducting a comprehensive valuation, preparing a capitalisation and restructuring plan and engaging with the RBI, Sebi and stock exchanges. It said listing would improve transparency, accountability, access to capital and liquidity, while clarifying the relationship between Tata Sons and Tata Trusts.