Former Tata Sons vice chairman argues an IPO can undermine the company’s special role in the group, and may not unlock much value
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Most readers encountering this issue yet again may feel fatigued by the continuing debate on whether Tata Sons should be listed. However, there are certain aspects that merit closer attention. Tata Sons Private Limited, labelled as a non-banking finance company (NBFC) and a core investment company (CIC), essentially functions as principal investment holding company of Tata Group. Over the years, it has consistently complied with all regulatory directives issued by RBI, adapting its structure whenever required.
When it was restricted from accessing bank funding, Tata Sons repaid all such borrowings and relied only on permitted non-banking sources. Subsequently, when maintaining a near debt-free profile became necessary to avoid listing, it repaid an amount of ₹20,000cr from internal resources, and prematurely redeemed preference shares. Similarly, when CIC rules were tightened to prohibit investments outside group companies, Tata Sons divested its relatively small non-Tata Group holdings. These responses reflect disciplined compliance without compromising its nature as a private holding company.
The latest requirement – compelling listing primarily because of asset size exceeding ₹1Lcr – raises concerns. When growth is rightly the prevailing mantra in our country, why compel and almost punish for growing to a certain size, and force a company to change its basic structure established over 100 years ago by the great founder of this House, nursed, built and financed by his successors, and which always complies with applicable laws and regulations?
A strange new obstacle stems from a retrospective interpretation of transactions from 1995, where investments by certain group companies are now alleged to involve “public funds”, effectively being treated as borrowings of Tata Sons today. It is difficult to establish the nature of such funds after three decades, and even more so to justify their present-day treatment in this manner.
More importantly, implications of listing go beyond regulatory compliance, and strike at the heart of Tata Sons’ role within the group. Historically, Tata Sons has not merely been a holding company but a promoter and custodian of group values. Examples include Sir Dorabji Tata pledging personal assets to save Tata Steel, to more recent actions, such as voluntarily settling liabilities of Tata Finance, which was close to default, by the then chairman Ratan Tata, who prevailed on Tata Sons board to honour obligations to Docomo, the partner in Tata Teleservices. These decisions were guided by reputation, responsibility, and long-term trust, rather than strict commercial logic.
A publicly listed Tata Sons would inevitably be accountable to institutional and foreign shareholders, whose primary focus would be financial returns. It is doubtful whether such investors would accept substantial deployment of capital to support or rescue group companies in distress. This tension could fundamentally alter Tata Sons’ traditional role and weaken the group’s internal support system. The above examples alone (and there have been other smaller ones) have saved lending banks from writing off tens of thousands of crores as NPAs. Tata Sons was able to take actions that new institutional and private investors in an IPO may hesitate to allow, from a purely commercial point of view.
Timing is another critical factor: The group currently faces large financial commitments from recently formed subsidiary companies, including Air India, investments in long gestation projects, and losses in newer ventures. The current situation in the case of Air India would be an acid test. All these would need to be disclosed fully in an IPO prospectus. Consolidated financial statements – reflecting subsidiary losses and borrowings – may not present an especially attractive picture to sophisticated investors, pointing to wrong timing for an IPO at the present time. Thus, even if listing were necessary, postponement may be prudent until these issues are addressed.
Equally important is the ownership structure and philosophy of Tata Sons. Around 66% is held by Tata Trusts, reflecting the founders’ vision of combining enterprise with philanthropy. Dividends from operating companies flow indirectly into charitable initiatives, reinforcing a long-standing commitment to social purpose. Listing would, therefore, introduce pressures on distribution and retention of funds that could dilute this unique model. Consequently, taking a long-term view of investing in greenfield and other ventures may become questionable.
The argument of improving liquidity for minority shareholders appears limited in scope. Most such shareholders – primarily Tata Group companies – have not advocated listing and have, in fact, benefitted significantly from dividends and appreciation over time. The principal demand for liquidity comes from Shapoorji Pallonji Group, whose position is understandable, but cannot alone justify a decision with such far-reaching consequences.
Moreover, shares in Tata Sons are not entirely illiquid; they can be transferred under established procedures, but at a discount to net asset value (NAV), as elaborated in the next para. Let it be said that the SP group’s investments in Tata Sons are minuscule compared to the dividends received and the enormous increase in value of Tata Sons shares over the years, which is well-documented.
Other listed Indian group investment holding companies also provide perspective. Such companies trade at discounts of 20% to 50% to NAV, as investors would prefer direct exposure to underlying operating companies. There is little reason to assume Tata Sons shares would be treated differently by the stock market, raising doubts about the effectiveness of listing for unlocking value. Therefore, it appears that shares of a holding company – listed or unlisted – would always attract a substantial discount.
Claims that listing would improve governance are equally debatable. Many governance failures have occurred even in listed entities, suggesting that listing alone is no guarantee of better oversight. Strengthening internal controls and regulatory supervision may be more effective than altering ownership structure.
It is also noteworthy that both Tata Trusts and Tata Sons have opposed listing, and even sought exemption. When both the principal owners and the company itself are aligned against such a move, their position deserves due consideration. Furthermore, similar pressure is not seen to be applied to other large group holding companies, raising questions about consistency.
In conclusion, the proposed listing of Tata Sons risks undermining a structure that has evolved over more than 100 years, blending commercial success with social purpose and long-term stewardship. Such a transformation may irreversibly alter its character. It is hoped that regulators will weigh these considerations carefully, and preserve a model that has stood the test of time. For those who may disagree, this perspective is offered respectfully, without intent for debate, but out of deep concern for the future of an institution to which the author has devoted a lifetime.
– NA Soonawala, Former Vice Chairman and Former Finance Director, Tata Sons Ltd, Former Trustee, Tata Trusts
This article was published in The Times of India on 21st May, 2026.
