Is RBI’s next move in Tata Sons listing in the offing?

As the battle for control of Tata Sons heats up, speculation is growing about a possible fresh move by the Reserve Bank of India (RBI). With the holding company’s board scheduled to meet on November 26, any new communication from the regulator could raise the stakes and turn the meeting into a battleground of arguments.

According to sources, the RBI may clarify its position following the lapse of the original deadline for listing of Tata Sons in September last year. “It has been simmering for some time, but it is unclear whether the regulator will issue it before November 26,” said a senior lawyer.

Regulatory challenges increase when Noel Tata, chairman of Tata Trusts, pushes for a restructuring that could help Tata Sons retain its privately held status, while Tata Sons chairman N. Chandrasekaran follows complying with the central bank’s directions.

Noel and Chandrasekaran held discussions earlier, mediated by Noshir Soonawala, to find common ground on the listing issue, but failed to reach a breakthrough, said sources. Noel subsequently sent two letters to Tata Sons, asking its executives to include the Tata Trusts’ restructuring proposal and a ₹25,000-crore partial stake-sale plan for the Shapoorji Pallonji (SP) Group on the board’s agenda.

The restructuring proposal, submitted on September 28, envisages merging two operating subsidiaries, Tata Electronic Systems Solutions (TESS) and Tata Consulting Engineers (TCE), with the holding company. The objective is to transform Tata Sons from a predominantly investment entity into an investment and operating company, altering its asset composition and potentially taking it outside the definition of a non-banking financial company-core investment company (NBFC-CIC).

Tata Sons has neither formally submitted the restructuring proposal to the RBI nor responded to Tata Trusts suggestion. The central bank had earlier rejected Tata Sons' application to surrender its certificate of registration and advised it to comply with regulations applicable to upper-layer NBFCs, including mandatory listing. The RBI has also filed a caveat in the Bombay High Court, anticipating a possible legal challenge from Tata Trusts.

RBI Governor Sanjay Malhotra earlier indicated that regulatory requirements cannot be bypassed merely by changing corporate structures. Finance Minister Nirmala Sitharaman, meanwhile, has urged the Tata leadership to resolve their differences amicably, ruling out any immediate suggestion of government intervention.

The November 26 meeting could further expose divisions within the Tata Sons board. Noel maintains that the RBI has not expressly directed Tata Sons to list and that restructuring offers a lawful alternative. Some Tata trustees have also questioned the positions taken by dissenting trustees Venu Srinivasan and Vijay Singh, accusing them of acting against Tata Trusts’ interests. Srinivasan, despite being a Trusts nominee on the Tata Sons board, has publicly opposed the Trusts’ position and supported the listing proposal, which could eventually reduce the Tata family’s influence over the group.

The differences within Tata Sons began with the listing issue. Noel subsequently opposed Chandrasekaran’s reappointment, but the board approved his third term without Noel’s support. Noel later sought the audio-video recording of the September 17 meeting. Tata Sons declined, saying the proceedings would be reflected in the minutes.

Another contentious item is the SP Group’s demand for ₹25,000 crore in liquidity. The proposal could help the debt-laden group monetise part of its 18.38% stake in Tata Sons and meet its funding requirements. It could also bring Shapoor Mistry closer to Noel’s position on the listing issue.

Noel wants the board to examine the legal and regulatory viability of the restructuring proposal. However, if the RBI issues another directive before November 26, the confrontation in the boardroom could intensify, leaving Noel with even less room to manoeuvre.