S&P Global Ratings on Tuesday said a potential stock market listing of Tata Sons, leadership changes at the top of the $180 billion conglomerate and any reconfiguration of the group's ownership structure could eventually reshape how it assesses support among Tata companies, even though no immediate rating action is contemplated.
The warning comes as a simmering dispute between Tata Sons Chairman N. Chandrasekaran and Tata Trusts Chairman Noel Tata has spilled into public view over the holding company's future, leadership and compliance with Reserve Bank of India listing requirements.
S&P said a routine listing of Tata Sons in its current form would likely be credit neutral. However, the arrival of public shareholders could increase scrutiny of capital allocation decisions, shareholder payouts and support extended to weaker group companies, potentially affecting its assessment of group backing over time.
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"We currently view Tata Sons as a single, key controlling entity,” the rating agency said, adding, “Any change in structure that makes a clear controlling entity less obvious or weakens the holding company's credit profile could affect our view of the group's credit quality, and thereby, the notch up for individual ratings.”
The comments are significant because S&P currently factors in up to three notches of group support for several Tata companies, including Tata Steel, Tata Motors, Tata Power, Tata Capital and Jaguar Land Rover.
“This is particularly relevant because rated companies such as Tata Steel, Tata Power, and Tata Capital have significant growth plans, and JLR is going through a business transition,” S&P Global said.
The report lands amid an unprecedented governance tussle within the Tata empire. Earlier this month, Tata Sons' board backed Chandrasekaran's continuation and moved ahead with preparations for a potential listing after RBI maintained the company's obligation to go public. Noel Tata opposed both moves, arguing Tata Sons should remain privately held and questioning the legality of the chairman's reappointment process.
On Monday, Tata Trusts proposed a restructuring of Tata Sons through the merger of Tata Electronics Systems Solutions and Tata Consulting Engineers into the holding company. The Trusts said the move would restore Tata Sons to an operating-company model and potentially remove its classification as both a non-banking financial company and a core investment company, thereby eliminating the need for a listing.
The proposal would create an entity with more than Rs 1.05 lakh crore of operating revenue and net assets of about Rs 2 lakh crore, according to the Trusts. The plan requires RBI approval and board consent.
For S&P, the key questions are who ultimately exercises control over the group, how that control is structured and whether the Tata model of supporting strategic businesses survives a possible transition from a tightly controlled holding company to one facing public-market discipline. Those answers, the agency suggested, could eventually matter as much as the ratings themselves.
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