RBI rejects Tata Sons' bid to stay private, directs listing
Tata Sons' bid to relinquish its core investment company registration has been turned down by the Reserve Bank of India, pushing the Tata Group's holding firm nearer to a public stock offering. Tata Trusts, the majority owner, aims to preserve the company's private nature for sustained stewardship. In contrast, the Shapoorji Pallonji Group is advocating for a public float.
Mumbai: The Reserve Bank of India has denied Tata Sons' request to retain its core investment company (CIC) registration, putting an end to the effort by the holding company of the $185bn Tata Group to remain private. The central bank has instructed Tata Sons to adhere to the regulations governing the country's largest investment companies.
This decision deters Noel Tata, chairman of Tata Trusts -Tata Sons' majority shareholder, and supports Shapoorji Pallonji Group chairman Shapoor Mistry, Noel's brother-in-law, who has advocated for a listing. The SP Group holds a 18.4% stake in Tata Sons. Tata Trusts seeks to maintain Tata Sons' private status to protect its charitable ownership structure and shield it from the pressures of public markets that a listing could bring.
The Reserve Bank of India's letter, expected to be presented before Tata Sons' board meeting on September 17, can prompt the company to proceed with the IPO, or Tata Trusts can challenge the move in the Bombay high court. Tata Sons requires majority approval from Tata Trusts' two nominee directors, Noel Tata and Venu Srinivasan, to proceed with an IPO.
With Noel opposed, the vote would be 1-1, leaving the chairman with the casting vote. The IPO would be approved if the chairman casts the deciding vote. Even if the issue is taken to Tata Trusts, little may change, as Sir Ratan Tata Trust, which owns 24% in Tata Sons, is under a regulatory ban, while Sir Dorabji Tata Trust, which holds 28%, must act jointly with Sir Ratan Tata Trust.
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