Directors of Tata Trusts will today discuss the potential listing of Tata Sons and the exit of the Shapoorji Pallonji Group. The meeting aims to resolve a boardroom dispute, which has raised concerns over the reduction of veto rights and the influence of minority shareholders. The government has intervened to try and resolve the differences.
Tata sons ipo: Directors of Tata Trusts, the holding entity of the country's oldest business conglomerate, the Tata Group, are holding an important meeting on Friday. This meeting concerns the potential IPO of Tata Sons and the exit of minority shareholder Shapoorji Pallonji Group. A boardroom dispute among the trustees has deepened over the past few months, leading to intervention by the central government. Trustees fear that the listing of Tata Sons could weaken their veto rights and increase the influence of the Pallonji Group. Meanwhile, the debt-ridden Pallonji Group wants to reduce its debt by selling its 18.37% stake, thereby easing financial pressure on the group.
Meeting Called After Government Intervention
According to sources familiar with the matter, this meeting was scheduled after a crucial discussion facilitated by the government on Wednesday. During this, with the intervention of the Home Minister and Finance Minister, officials appealed to representatives of Tata Trusts and Tata Sons Private Limited to resolve their differences. The primary objective of the discussion was to prevent any negative image or disruption to the group's operations.
According to sources, the dispute escalated when some trustees decided to remove former Defense Secretary Vijay Singh from the board of Tata Sons. Simultaneously, an attempt was also made to remove another director, Venu Srinivasan. Both are considered close to Noel Tata, who is the Chairman of Tata Trusts.
Trusts' Stake and Power
Tata Trusts holds approximately 66 percent stake in Tata Sons. Due to this stake, the Trusts not only have the right to appoint one-third of the board members but also hold veto rights on major strategic decisions. This structure gives them a significant role in determining the group's direction.
However, this very structure has now become the root of the dispute. Differences over the balance of power among the trustees are deepening. Experts believe that any serious rift within the Trusts will directly impact Tata Sons and the entire Tata Group. The Tata Group has 26 listed companies, with a reported total annual revenue exceeding $180 billion.
Discussion on Pallonji Group's Stake
Tata Trusts has instructed Natarajan Chandrasekaran, Chairman of Tata Sons, to initiate discussions with the Shapoorji Pallonji Group to determine a peaceful exit plan for their stake. The Pallonji Group holds an 18.37 percent stake in Tata Sons and is seeking to sell it to reduce its increasing debt.
The group's financial situation has been deeply affected after the pandemic. The company urgently needs funds to repay the debt on its infrastructure projects. The proceeds from the sale of this stake are intended to be used to reduce their debt burden.
Eyes on RBI's New Guidelines
According to sources, Tata Sons is currently awaiting new guidelines from the Reserve Bank of India. It is expected that by the end of the year, the RBI may issue regulations that could provide relief to holding companies from mandatory public issues. If this happens, Tata Sons will not have to rush into an IPO.
However, this delay could prove detrimental to the Pallonji Group, as the group wishes to monetize its stake quickly to alleviate financial pressure.
Considering Several Options
The Shapoorji Pallonji Group is considering several options for selling its stake. These include a direct share buyback by Tata Sons, selling a partial stake to an institutional investor, or a strategic partnership.
According to a Bloomberg report, the Pallonji Group plans to use the potential proceeds from the sale of its stake to repay the debt of its infrastructure unit. This would reduce their borrowing costs and could improve the group's credit rating.
High Hopes from the Meeting
Today's meeting of Tata Trusts is expected to take concrete steps towards resolving the ongoing differences within the Tata Group. This meeting could lay the groundwork for important decisions in the coming months, such as the listing of Tata Sons, the role of the Trusts, and the exit of the Pallonji Group.
Overall, the impact of Tata Sons' IPO and the stake dispute could affect not only the group's future but also the structure of the Indian corporate world.
