The Indian business empire being forced to list against its will

{"text":[[{"start":11.44,"text":"India’s biggest conglomerate is being forced by the central bank into a $120bn listing it does not want, potentially opening some of the country’s most valuable and closely held companies to rivals and raiders."}],[{"start":24.2,"text":"The Reserve Bank of India at the weekend rejected an appeal by software-to-Range Rover maker Tata for an exemption from rules requiring it to list its holding company."}],[{"start":34.28,"text":"A listing may value Tata Sons at more than $120bn, according to analyst estimates, which would make it India’s largest-ever initial public offering. It would profoundly transform the ownership and governance of the renowned Mumbai-based business house, which has remained closely held for more than a century."}],[{"start":53,"text":"But it would be a major blow for Noel Tata, chair of the charitable trusts that control the group and a scion of the founding family, who has resisted an IPO."}],[{"start":62.28,"text":"The “RBI would not make a decision as big as this without getting an implicit informal go-ahead from the government”, said Nirmalya Kumar, visiting professor at the Indian School of Business and a former Tata executive, echoing a sentiment voiced privately by other senior executives familiar with Tata."}],[{"start":79.12,"text":"Noel has argued a listing would fatally undermine Tata Sons’ ability to exercise long-term stewardship of the vast conglomerate, which assembles Apple iPhones, runs Air India and makes products including Tetley tea, steel and Jaguar Land Rover cars."}],[{"start":94.04,"text":"Disagreement over whether to list was a crucial factor in a boardroom feud this year, which culminated in long-serving Tata Sons chair N Chandrasekaran announcing last month he would step down at the end of his term next February."}],[{"start":106.98,"text":"This means Tata faces the prospect of being forced into a complex listing as it is seeking a new leader for the holding company."}],[{"start":113.8,"text":"Senior executives and foreign investors in India have long complained about what they say is the increasingly arbitrary nature of regulation in the country, citing uncertainty about the rule of law as a deterrent to investment."}],[{"start":125.8,"text":"“A company which does not want to go public is being forced to by the government,” said a person close to Tata Sons, adding that the regulatory uncertainty surrounding the process “is going to do serious damage to foreign investment”."}],[{"start":138.62,"text":"Nitin Potdar, a lawyer who has advised several multinationals in India and worked for Tata in the past, said the RBI’s shifting rules on listing requirements suggested it was applying the law in a selective manner."}],[{"start":null,"text":"

"}],[{"start":151.68,"text":"Most large Indian companies’ ownership is “structured in a way whereby the actual owner is always hidden” and “to avoid transparency”, he said."}],[{"start":161.24,"text":"“No one asks them to put their ownership into one structure,” said Potdar. “And here is a conglomerate which has transparently said: ‘I am one holding company’ . . . and you want to penalise that company.”"}],[{"start":173.76,"text":"More than two dozen Tata businesses, including IT services provider Tata Consultancy Services and retail chain Trent, are already listed. Tata Sons wields control over them through large stakes."}],[{"start":186.06,"text":"Listing the holding company could make some of those subsidiaries targets for corporate raiders, especially as some shareholders have already said they would sell in the event of a listing."}],[{"start":195.24,"text":"Tata Sons’ largest minority shareholder Shapoorji Pallonji — a debt-laden construction and engineering group with longstanding ties to the Tata family — has long pushed for a listing to sell part of its 18 per cent stake."}],[{"start":208.12,"text":"Rival conglomerates “will have an interest in Tata Sons”, said a person who serves as a director in its subsidiaries."}],[{"start":215.48,"text":"The regulatory clash stems from the RBI’s move in 2022 to classify Tata Sons as an “upper-layer” non-bank financial company under rules introduced to compel India’s biggest “shadow banks” to go public and face tougher supervision."}],[{"start":229.72,"text":"The RBI said at the time its push to list shadow banks was aimed at introducing more transparency and reducing systemic risks in the financial sector."}],[{"start":238.72,"text":"In an attempt to remove itself from the framework that triggered the listing requirement, Tata Sons in March 2024 formally sought to surrender its RBI-imposed registration as a core investment company after repaying its borrowings."}],[{"start":252.28,"text":"But the RBI changed its policy this year and set Rs1tn ($10.4bn) in assets as the threshold for large shadow banks, long after Tata, which has Rs2tn in assets, applied to deregister. This meant the conglomerate was still caught by the listing rules."}],[{"start":266.36,"text":"Several people familiar with Tata said the RBI’s listing order would not have come without a nod from the top level in Prime Minister Narendra Modi’s government, given the company’s outsized importance to the Indian economy."}],[{"start":279.72,"text":"The RBI, finance ministry, Tata Trusts and Tata Sons did not respond to requests for comment."}],[{"start":null,"text":""}],[{"start":286.88,"text":"People with knowledge of the company said Chandrasekaran did not oppose a listing, while Noel — who took charge after the death of his half-brother Ratan Tata two years ago — has accused the outgoing chair of ignoring the trusts’ wishes to remain private."}],[{"start":301.36,"text":"Modi’s government has taken a keen interest in Tata’s stability. Last year, two senior ministers held an extraordinary meeting with Noel and Chandrasekaran as the group was engulfed in a governance crisis. Since then, the two men’s relationship has deteriorated further, according to people close to them."}],[{"start":319.42,"text":"“It’s a little bit like an Indian soap opera,” said Kumar at the Indian School of Business. “It’s quite a headache for Noel.”"}],[{"start":327.74,"text":"Local media have speculated that Tata Sons’ board could ask Chandrasekaran to reconsider his departure to help steady the ship ahead of an IPO, but a person close to the company said his staying on was “not an option”."}],[{"start":341.72,"text":"Executives close to Tata said the group’s leadership was considering its options ahead of a board meeting on Thursday, including whether to mount a legal challenge to the RBI decision, which could delay a flotation."}],[{"start":352.44,"text":"“Litigation through India’s court system . . . has historically run long,” said Sumit Agrawal, managing partner at Mumbai-based Regstreet Law Advisors and a former officer at India’s capital markets regulator. But he cautioned on Tata’s “low probability of success”."}],[{"start":369.76,"text":"“Indian courts have historically given RBI wide deference on prudential and systemic classification matters,” he said, “generally applying a light-touch reasonableness standard rather than second-guessing the regulator’s technical judgment.”"}],[{"start":384.28,"text":"An executive close to Tata acknowledged a legal challenge would give the company “some time, but I don’t think it will be more than that”."}],[{"start":391.04,"text":"The ultimate decision on how to respond will depend on the charitable trusts, but that process could prove complicated."}],[{"start":398.36,"text":"One of the principal bodies, the Sir Ratan Tata Trust, faces regulatory scrutiny and has been blocked from conducting business or board meetings until its conclusion."}],[{"start":407.88,"text":"A person familiar with the matter said Tata’s management team under Chandrasekaran had already started working quietly on IPO paperwork this year, but a listing could still take two years."}],[{"start":419.12,"text":"“In the long run, there is no way they can escape this listing,” said Kumar. “It’s like fighting a tide . . . the only thing is they can delay this tide.”"}],[{"start":432.76,"text":""}]],"url":"https://audio.ftcn.net.cn/album/a_1789535419_8564.mp3"}