Dispute over IPO and split in Tata Sons board of directors led the company to crisis

The Shapoorji Pallonji Group, which is the second-largest shareholder in Tata Sons with an 18 percent stake, has firmly supported the listing of the conglomerate's holding company, which operates in salt production and software.

This statement followed two days after Noel Tata, Chairman of Tata Trusts, opposed the listing proposal at the Tata Sons board meeting on September 17. Shapoorji Pallonji Chairman, Mistry, published a detailed statement explaining why going public is the right path for the company.

Mistry stated that the goal of this process is not to achieve the victory of any single party, but to create a stronger Tata institution, enhance philanthropy, increase accountability, deepen partnership, and ultimately provide greater assistance to India. His position contrasts with that of Tata Trusts, the largest shareholder in Tata Sons, which holds 66 percent of the shares.

Noel Tata is connected to the Shapoorji Group through his daughter's marriage to the late Pallonji Mistry and the sister of the current Chairman of Shapoorji Pallonji Mistry and the late Cyrus Mistry.

At the board meeting on Thursday, Noel Tata presented the Shapoorji Group's proposal for a monetization worth 25,000 crore rupees through a partial sale of its stake in Tata Sons via an over-the-counter channel.

However, on Friday, Mistry noted that he accepts the decision of the Reserve Bank of India (RBI) with deep respect and humility. He welcomes this decision, believing it marks a turning point not only for Tata Sons but also for the principles of transparency, accountability, fairness, and responsible institutional building that should guide nationally significant enterprises.

Noel Tata insisted on further interaction between Tata Sons and the RBI to maintain private status, arguing that the regulator's directive of September 11, 2026, did not mandate a listing. He had previously stated, 'As I understand it, it does not say that listing is the only option. There remains significant space, and the board of directors must occupy that space, not yield it.'

Nevertheless, Mistry later emphasized that the RBI provided complete clarity. Tata Sons was classified as a top-tier NBFC under the RBI's Regulatory Framework for Scale, and the prescribed path of listing followed this regulatory architecture. Since the RBI rejected the application for exemption and directed Tata Sons toward necessary compliance in the shortest possible time, the way forward became clear. He expressed gratitude to the RBI and the government for the clarity of purpose and discipline shown in adhering to uniform standards for all institutions, regardless of their size or status.

He also expressed admiration for the leadership of Prime Minister Narendra Modi, especially his commitment to strengthening institutions and ensuring the ability to perform duties with clarity, authority, and purpose.

Mistry reiterated that the public listing of Tata Sons is not merely a financial or regulatory issue. 'It is a social and moral imperative. It is about strengthening transparency and public accountability in one of India's most significant business institutions, while preserving and advancing the exceptional philanthropic purpose underlying the Tata legacy.'

He added that this 'landmark decision should not be viewed as a victory of one interested party over another. It should be seen as an opportunity to unite people and institutions.'

In Mistry's view, the listing of Tata Sons can become a bridge: 'a bridge between shareholders and Tata Trusts, between private heritage and public accountability, between generations of management, and between India's great past and the exceptional future that awaits.'

Pointing out that the relationship between the Shapoorji Pallonji and Tata groups spans over a century, he expressed hope not only for resolving the current phase but also for forming a broader partnership, more active interaction, and deeper relations with Tata Sons and Tata Trusts in the coming years, always maintaining mutual respect and prioritizing national interests above all else.

Analysts note that Mistry's statement will be closely watched amid the listing battle, as well as the Tata leadership contest, where veto votes may be cast regarding the reappointment of N Chandrasekaran as Chairman of Tata Sons for a third term.

According to Mistry, Jamshedji Tata's fundamental philosophy serves as the moral foundation for this moment. He quoted Jamshedji, who said: 'in a free enterprise, the community is not just another stakeholder in business, but in fact the very purpose of its existence.'

He continued that Jamshedji Tata's life demonstrated that entrepreneurship and nation-building do not necessarily have to be separate pursuits; the enterprise itself can serve as a tool for national progress. 'It is this philosophy that must guide the next chapter of Tata Sons. The question before us should not be limited to who owns what or how the corporate structure is maintained. The bigger question is how one of India's greatest industrial institutions can become even stronger, more transparent, more accountable, and more capable of serving the nation.'

The Tata Group and the Shapoorji Pallonji Group have decades of close business ties. In 2012, the group's son, Cyrus Mistry, was appointed Chairman of Tata Sons. Later, in 2016, he was removed from the post after a board struggle led by then-Tata Trusts Chairman Ratan Tata.

Ten years after that incident, the Shapoorji Group Chairman stated on Friday: 'I believe that a transparent and publicly accountable Tata Sons can strengthen the entire ecosystem. It can expand participation, improve governance, ensure greater visibility of value, protect the legitimate interests of investors, and create a foundation for a more robust and fair dividend policy.'

He also added that Tata Sons as a listed company can strengthen Tata Trusts' ability to fulfill its philanthropic obligations across generations. 'A stronger Tata Sons, operating transparently and responsibly, can help make this ambition possible through sustainable business growth and a continuous flow of value to philanthropy.'

Uncertainty persists surrounding the listing of Tata Sons, the holding company of the Tata group. Although the company's board of directors decided to advance steps related to a potential share offering, Tata Trusts has stated that it does not approve of this listing.

According to sources, Noel Tata stated during a Tata Sons board meeting on Thursday: 'The listing will lead to the disappearance of the current form of Tata Sons and directly affect the fundamental principle upon which the entire structure is based.' The Chairman of Tata Trusts, Noel Tata, also spoke out against it, insisting that instead of rushing to the stock market, all alternative paths should be considered. Therefore, deeming the Tata Sons listing inevitable at this moment would be premature.

The Tata Sons board of directors met on Thursday. At this meeting, the appointment of N. Chandrasekaran as the company's executive chairman for another five years was approved. As part of the same meeting, a decision was made to move towards listing Tata Sons on the stock market. However, this is where the disagreement with Tata Trusts emerged. Tata Trusts owns approximately 66% of Tata Sons shares and clearly stated after the meeting that it disagrees with the Tata Sons listing. The Trust believes that instead of only pursuing the IPO or listing option, all available options for the company must be immediately examined.

To understand this dispute, one must look at the matter between Tata Sons and the Reserve Bank of India (RBI). According to RBI regulations, Tata Sons is considered a financial company of a specific category. In March 2024, the company voluntarily applied to the RBI for the withdrawal of its Certificate of Registration (CoR) as a financial company.

However, Tata Sons' request was rejected by the RBI. Following this, Tata Sons had to consider several options regarding the company's current status, including going public. Nevertheless, Noel Tata notes that the RBI letter did not state anywhere that listing was the only way out.

The Chairman of Tata Trusts, Noel Tata, argues that Tata Sons cannot be viewed merely as a conventional holding company. Simply put, Tata Sons holds stakes in several major companies of the Tata group, and Tata Trusts is the largest shareholder of Tata Sons. This stake of Tata Trusts is linked not only to commercial investments but also to the philanthropic activities of the Tata group.

Noel Tata is concerned that if Tata Sons is listed on the stock market, the existing rights and influence of Tata Trusts over the company may weaken. In his view, the current capital structure of Tata Sons has maintained a special link between the group's business and its social and charitable activities for over a century.

Noel Tata proposed that Tata Sons re-present its position in detail to the RBI and request a review of its initial application. He also believes that the company should demand the opportunity to be heard by the RBI. Furthermore, the company should explore whether the issue can be resolved by making changes to the existing structure or through another legal route. Another important suggestion is that major steps, such as preparing for listing, appointing consultants, or determining the structure and timeline of the IPO, should not be taken without consulting Tata Trusts.

Noel Tata also mentioned the unanimous decision of the Tata Sons board of directors made in March 2024. At that time, the board decided to keep the company unlisted, meaning not to take it public. During this period, under the leadership of the late Ratan Tata, an application was submitted to the RBI for the withdrawal of the company's registration certificate. Subsequently, Tata Sons repaid its debts by raising funds from internal financial strength and some Tata group stakes.

The company also pre-purchased about 20,000 crore rupees worth of preference shares. Noel Tata emphasized that the fact that the company could spend such a large sum to preserve its structure meant that the decision to keep the company private was important at that time. According to him, the Tata Sons board's decision from March 2024 remains valid as it has not been officially changed before the board.

Noel Tata stated that if all attempts to keep Tata Sons a private company prove unsuccessful and a stock market listing ultimately becomes necessary, it should be given sufficient time. He requested a minimum of three years, suggesting a deadline until September 2029. The reason is that an IPO is not just selling shares on the stock market. First and foremost, the company needs to change its rules, obtain approval from existing shareholders, prepare financial statements, hire investment bankers and other consultants, conduct full due diligence on the company, and much more.

The Reserve Bank of India's (RBI) decision regarding the listing of Tata Sons is the result of prolonged efforts by the conglomerate's largest minority shareholder, Shapoor Mistri, although the path to public offering remains complex.

This decision followed an open letter sent by billionaire Shapoor Mistri, who heads the heavily indebted Shapoorji Pallonji Group, to the regulator, requesting the inclusion of Tata Sons Pvt. in the list of listed companies. The goal of this move was to unlock the value of the group's 18.4% stake. According to the Bloomberg Billionaires Index, this stake is worth approximately $31 billion, and nearly three-quarters of Mistri's net worth is tied up in Tata shares.

Recently, leaders of the SP Group have also held meetings with Indian government officials to present their position. According to informed sources, they convinced some high-ranking officials about the potential contagion risk should the construction giant face default.

Representatives from the RBI, the Indian Ministry of Finance, Tata Sons, and the SP Group did not respond to requests for comment regarding the regulatory decision made last week or the reasons behind it.

The RBI's decision does not set a timeline for the Tata Sons IPO, which could help resolve broader financial issues facing the SP Group. Furthermore, a potential legal dispute between Tata and the RBI could further prolong the process.

Concerns over contagion risk arose due to the scale of the recent bond sale by the SP Group—one of the largest private lending deals in India. In this transaction, the construction giant raised about ₹151 billion ($1.6 billion), with global investors, including Farallon Capital Management, Davidson Kempner Capital Management, and Cerberus Capital Management, acquiring approximately $175 to $200 million worth of bonds.

According to a July report, investors were encouraged by the prospects of monetizing the Tata Sons stake, which could potentially free up billions of rupees in liquidity. The terms of the deal reviewed at that time stipulated an 18-month period to monetize this stake either through an IPO or another method.