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India’s central bank has rejected Tata Sons’ bid to avoid having to go public in a move that will force the vast conglomerate to undertake a radical transformation of its structure and operations.
In a letter to Tata Sons’ chief financial officer Saurabh Agrawal seen by the FT, the Reserve Bank of India said the holding company’s application to deregister itself as an upper-layer ‘shadow bank’ “cannot be acceded to”. Tata must comply with the RBI’s guidelines “immediately”, it said.
In 2022 the regulator classified India’s largest conglomerate, which is privately owned, as one of the country’s largest non-banking financial companies and required it to go public within three years as part of its efforts to increase transparency in the financial sector. It could become India’s largest IPO.
Tata Sons resisted the central bank’s instructions and, after reducing its debt levels, applied to the RBI in March 2024, asking it to reconsider the classification.
While Tata Sons is not a conventional lender, it invests across its sprawling array of entities which include hundreds of subsidiaries and 26 listed companies in sectors including defence, steel and consumer goods. It controls Jaguar Land Rover, Air India and India’s largest IT company Tata Consultancy Services.
Analysts estimate the listing could value Tata Sons, which is majority owned by a set of charitable trusts, at over $120bn.
The RBI’s decision comes at a moment of turmoil for the group. Its chair N Chandrasekaran unexpectedly announced his resignation last month after a long-running boardroom tussle and weak performance by some of the group’s businesses, including IT services and its lossmaking airline Air India.
The forced listing has become a growing source of contention at the top of the group.
Noel Tata, the family patriarch who took over as chair of the trusts after his half-brother Ratan Tata died two years ago, is said by people familiar with the matter to have been against an IPO, arguing that remaining private suited the conglomerate and gave it more freedom to make long-term investments and bets.
Critics have said that the private ownership structure allows him to exert more control, giving him an effective veto over major decisions.
An IPO “would put the trusts at par with any other shareholder”, said a person close to the group.
The regulatory ruling is a major win for Shapoorji Pallonji, a debt-laden engineering and construction group which holds an 18 per cent stake in Tata Sons and has been pressing for a float in order to be able to sell its shares.
Tata Sons declined to comment. Noel Tata and the RBI did not respond to requests for comment.