Tata Sons IPO: Could the debate around SP Group scuttle the issue?
The IPO of the Tata Sons is unlikely to be floated now. While reports indicate that the Tatas are now enthusiastic in taking outside investors in the holding company of the conglomerate, they are also not willing to let the Shapoorji Pallonji group earn a big amount through selling some of their shares through the issue.
Kolkata: An IPO of the Tata Sons could be the stuff of the dreams of many investors. The holding company of the Tatas is one of the most prestigious companies in the entire country. However, reports indicate that there are differences inn the Tata Group around the Shapporji Pallonji group and this could be an impediment.
While an IPO from Tata Sons was being discussed in different circles for quite a long time, recent controversy within the group have gone to an extent when it seems that the public issue has been jeopardised. According to media reports, the Tata trusts who play a major role in the group's affairs, have veered around to the view that a public issue is best not pursued right now since brining in investors from outside will not be in the best interest of the Tata group and such investors can weaken the control of the group..
Shapoorji Pallonji Group pressure
The Shapoorji Pallonji (SP) Group has been a major shareholder of Tata Sons and controls about 18% of the holding company of the Tata. They have been pushing for a public issue. The Shapoorji Pallonji group wants to sell its stake and earn a handsome amount. According to reports, while Tata Sons could be valued at Rs 11 lakh crore, the stake of Shapoorji Pallonji could run up to about Rs 2 lakh crore. Thus, Shapoorji Pallonji can earn a handsome amount by selling off its stake in Tata Sons.
Reports said that in a recent meeting Noel Tata raised questions about the finances of the Shapoorji Pallonji group. "Why did the SP (Shapoorji Pallonji) Group take a loan of Rs 50,000 crore and where did the money go?" Tata reportedly asked. This question has raised doubts that there was no role of family ties in this decision. The indication is clear: the Tatas are in no mood to bail out the Shapoorji Pallonji group through the public issue that will allow the latter to earn a huge amount through an OFS issue.
NBFC certification
The question of an IPO of Tata Sons was raised by Reserve Bank of India. In 2022, RBI said that Tata Sons has to be listed within three years since it qualified as an NBFC of the upper layer. To find a way out, in January Tata Sons surrendered its NBFC certification, and in the process, turned into a "closely held" company. Tata Sons has also paid off its debts and restructured its operations.
Tata Sons was reportedly never comfortable with the idea of a public issue. Reports also pointed out that some trustees earlier raised concerns about lack of transparency around the proposed public issue. When the question of an IPO was raised with the Tata Sons board, trustees were allegedly not provided with complete information and one even went on to allege that they were not shared information on it. Against that backdrop of general reluctance, it is unlikely that the Tata Sons IPO will proceed now.