Tata Sons IPO controversy may end soon. There is a reason for that too. Mistry family’s Shapoor Pallonji Group may partially exit Tata Group. Tata Sons’ two major shareholders – Tata Trusts and Shapoorji Pallonji (SP) Group – are moving towards agreeing on a peace formula that could provide an exit route for Shapoorji Pallonji (SP). The FE report, quoting sources close to the matter, said that Tata Group is considering allowing a partial exit of SP Group, which holds 18 per cent stake in Tata Sons. Tata Trusts holds 66 percent stake. After which SP Group can withdraw the demand for bringing IPO. After which this entire controversy will end.
Talks going on since October 1
FE had first reported on October 1 that both sides had intensified talks on this issue. If such a deal is ultimately agreed, SP Group could withdraw its persistent demand to list Tata Sons, the holding company of India’s largest private conglomerate.
This option may be discussed informally in the board meeting of Tata Trusts to be held on Friday, although it is not included in the formal agenda. The final decision will definitely have to be taken by the board of Tata Sons, but trusts play an important role in the decisions taken by Tata Sons. This board meeting is taking place against the backdrop of tension among the trustees over governance and decision-making issues.
Which options are being discussed?
SP Group is struggling with a debt of Rs 30 thousand crores. Has been demanding an exit for a long time. However, Tata Group is opposing the listing of Tata Sons, due to which tension has increased between the two parties. Financial Express quoted sources as saying that a partial exit would be a good option for both the parties. Another possible way to resolve this dispute could be that Tata Sons buys back its shares in case of non-listing. But its process can be quite lengthy.
Ahead of the annual general meeting on August 14 this year, Tata Sons Chairman N Chandrasekaran had met SP Group Chairman Shapoor Mistry to discuss the strategy going forward. This came soon after Noel Tata-led Tata Trusts directed the Tata Sons chairman to consider all options so that the Tata group holding company remains private. The trusts also asked him to help SP Group exit the group. Since then, several rounds of talks have taken place between the two on a viable path forward.
RBI also placed the condition
This comes after the Reserve Bank of India made it clear that it would not oppose Tata Sons’ request to cancel its upper-tier NBFC status. Provided that Tata Trusts and SP Group present a united stand on maintaining Tata Sons as a private entity. The regulatory deadline for upper-tier NBFCs to go public has already passed, but it is believed that the regulator is ready to give some more time to both the parties to take a unanimous decision on the issue.
If both the parties agree on the demand of not taking Tata Sons private and withdrawing the NBFC tag, then RBI will not have any problem. Tata Sons has sought relaxation in the listing norms on the grounds that being a private limited company, it is not bound to follow the RBI listing guidelines.
Tata has completed all the parameters
Tata Sons has already fulfilled almost all the regulatory conditions to remain a non-listed company. In August 2024, it surrendered its NBFC license after repaying all its debt and became a cash-positive company by March 2024 – the most important criteria for large non-banks to go private under RBI norms. Tata Sons had repaid over Rs 20,300 crore of debt between March 2023 and March 2024, leaving it with only a small amount of non-convertible debentures and preference shares, and thus fulfilling one of the key conditions of remaining a private, privately owned company, which gives it greater strategic flexibility and control over its operations.