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Today is a very important day for Tata GroupImage Credit source: ai generated

Today is going to be a very important day for Tata Group, one of the largest and most prestigious industrial houses in the country. A very important meeting of the board of Tata Trusts is being organized on 8th May. The main agenda of this meeting is the possible stock market listing (IPO) of 'Tata Sons'. The new and strict rules of the Reserve Bank of India (RBI) have put immense pressure on the company to go public. The interesting thing is that there is no consensus within the Tata family itself regarding this listing. On one hand, some trustees are considering it as a step towards transparency, while on the other hand, Noel Tata is strongly against it.

Has Tata exhausted all its options?

The biggest challenge before Tata Sons is the new guidelines of the Reserve Bank of India. Under the rules to be implemented from July 1, RBI is going to give Tata Sons the status of a 'Shadow Bank' i.e. Systemically Important Non-Banking Financial Company (NBFC). According to these rules, it is mandatory for companies falling in this category to be listed in the stock market.

This is not the first time that Tata Sons has come under this pressure. Even in the year 2022, RBI had declared the company an 'upper-layer' NBFC and given an ultimatum to go public within three years. Then Tata Group had proved itself to be a non-systemic entity by restructuring its debt and was successful in remaining private.

But now the situation has changed. RBI has made it clear that shadow lenders who do not take funds directly from the general public will also come under the purview of this rule, especially if their assets are more than Rs 1 lakh crore. If reports are to be believed, RBI has also made it clear informally that it is not going to give any special exemption to Tata Sons from listing, because it will set a wrong example for other companies in future.

Why has this internal dispute deepened?

The most attention-grabbing thing in this entire matter is the ongoing internal conflict within the Tata Trusts. About two-thirds of Tata Sons' stake is with Tata Trusts. Two of the six key trustees of the trust, Venu Srinivasan and Vijay Singh, believe that listing of the company will bring more transparency and financial discipline in its functioning. On the contrary, Noel Tata, who is trying to strengthen his hold on the group after the demise of his half-brother Ratan Tata, is strongly against this IPO.

Their opposition is to such an extent that in February, when Tata Sons Chairman N. When Chandrasekaran's third term was being discussed, according to a Bloomberg report, Noel Tata had sought assurance from him that the holding company would not be listed. When Chandrasekaran refused to give this guarantee, the Tata Sons board postponed voting on his reappointment. The appointment of a new nominee is also to be discussed in the meeting on May 8, which the industry is considering as a strategic move by Noel Tata to increase its power.

If IPO comes, who will benefit the most?

Investors have always expressed confidence in Tata Group companies. If Tata Sons enters the market, it will be a historic event for the Indian stock market. However, the biggest and direct benefit of this entire process is going to be to Shapoorji Pallonji Group. This group has a huge minority stake of 18.4% in Tata Sons. Shapoorji Group has taken a very expensive loan from the market by mortgaging its stake.

The total wealth of Shapoor Mistry and his family is estimated at $32 billion, of which about 75% is stuck only in the shares of Tata Sons. At present these shares are 'illiquid', which cannot be immediately converted into cash. Shapoorji Group has already openly supported the listing, because if the company goes public, the true value of their stake will be unlocked.

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