Tata Sons IPO would be detrimental to shareholders amid Air India, Tata Digital losses: Noel Tata

Noel Tata has urged the Tata Sons board to look beyond a public listing, arguing that the Reserve Bank of India’s latest communication does not require the company to pursue an IPO. The Tata Trusts chairman outlined his objections in a detailed statement at the board meeting today, days after the RBI rejected Tata Sons’ request to surrender its NBFC registration.

A public issue of Tata Sons at this point would be detrimental to the company and its shareholders, given the “huge losses” of Air India and Tata Digital, Noel Tata said at the board meeting. He said rushing into a public offering, while presenting investors with a consolidated financial picture that has not yet matured, would not serve the interests of the company, its shareholders or the Indian capital markets.

“An offering made in haste, into a market presented with a consolidated picture that has not been allowed to mature, would serve neither the company, nor its shareholders, nor even the shareholder that seeks liquidity, nor the standing of the Indian capital markets,” he said in a statement.

Noel Tata said the listing process could take “several months if not years”, given the work involved. This would include changes to the Articles of Association and the shareholder approvals required for them, along with preparing and restating consolidated financial statements to the standards required for an offer document.

The company would also need to appoint intermediaries, complete due diligence and resolve valuation issues, he said.

The Tata Trusts chairman also flagged the financial commitments of recently acquired and newly formed subsidiaries, including in civil aviation, as well as the losses and borrowings that would emerge in a consolidated presentation.

Noel Tata pointed to long-gestation investments in semiconductors and electronics manufacturing, where returns are expected well beyond a reasonable offer horizon, as well as the current market appetite for holding company stocks.

Seeks three years for compliance

Noel Tata said that even if the company ultimately has to list and listing is the only option, Tata Sons should be given three years to comply, starting from the date of the Reserve Bank of India’s communication on September 11, 2026.

He referred to the RBI’s scale-based regulatory framework, under which an upper-layer non-banking financial company is ordinarily given three years to list.

“The three-year period should start now,” Noel Tata said.

He said Tata Sons had never previously been told that it must list. The company had applied for a route that would have made listing inapplicable and then waited two and a half years for a decision.

The Tata Trusts chairman said the time spent waiting for the regulator’s decision should not be counted against the company.

The board should therefore seek at least three years from the date of the communication, or until September 2029, and explain why the additional time is needed, he said.

Tata Trusts should be involved at every step

He also called for the Tata Trusts to be involved before any further steps are taken towards a potential listing.

He said the Trusts should be consulted before any submission is made to the Reserve Bank, before an adviser is appointed and before any decision is taken on the structure or timing of a listing.

Any structural move towards a listing would require shareholder approvals, which the Trusts would have to provide, he said.

“The Trustees have obligations of their own, owed to the objects of the Trusts and answerable elsewhere, which they cannot discharge upon information they receive after the event,” Tata said.

Noel Tata also said the Reserve Bank’s September 11 communication had reached the board without warning. Given that the matter had been pending for two and a half years and the company was in “close and continuous engagement” with the regulator, he said the board should have been updated on the direction in which the decision was moving.

He said he had asked the company for the complete set of documents and information relating to the matter. The company should also consider seeking the complete file and notings from the Reserve Bank under the Right to Information Act, he said.

‘All options must be explored’

Noel Tata said the Reserve Bank’s communication declined the company’s application for voluntary surrender of registration but, in his reading, did not say that listing was the only option.

“Considerable room remains, and this board should occupy that room rather than concede it,” he said.

He called on Tata Sons, in consultation with the Tata Trusts, to make a detailed representation for reconsideration and continue its engagement with the regulator.

Noel Tata also said the company should seek an opportunity to be heard by the regulator before any final view is taken on the representation.

The company should explore all permissible avenues to avoid a public listing, including restructuring, he said.

“The regulations themselves contemplate other options. All such avenues and options must be explored,” the Tata Trusts chairman said.

He also called for the board, in consultation with the Tata Trusts, to obtain legal advice on the remedies available in relation to the Reserve Bank’s communication.