- Tata Sons-Tata Trusts dispute centers on N Chandrasekaran's chairmanship continuation
- Tata Trusts oppose Tata Sons public listing; nominee Venu Srinivasan supports it
- RBI classifies Tata Sons as upper-layer NBFC, pushing for company listing
The widening Tata Sons–Tata Trusts rift over N Chandrasekaran's continuation as chairman has brought into sharper focus a deeper disagreement — particularly over Tata Sons listing.
With Tata Trusts chairman Noel Tata opposing a public listing while Trust nominee Venu Srinivasan backing, senior advocate Harish Salve, legal adviser to N Chandrasekaran, has argued that the focus on the contentious board meeting had shifted attention from "real issue".
In an exclusive interview with NDTV, Salve said the focus had shifted to the board meeting instead of the concerns articulated by the Tata Trusts in a letter to Sir Dorabji Tata Trust Vice Chairperson and Tata Sons Director Venu Srinivasan. "In their words, you are supportive of the listing of this company, the Tata Trusts are against the listing of the company. You, Mr Srinivasan, are, therefore, conflicted," the former Solicitor General of India said.
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When asked how could the board go against wishes of shareholders regarding Chandrasekaran being reappointed as executive chairperson of Tata Sons, he added: "A lot of short answers for what you said. Bigger issues are at play. Let's not miss the wood for the trees. It's a good forensic ploy to obtain legal advice."
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Salve stated Tata Sons was moving towards a listing following the Reserve Bank of India's classification of the company as an upper-layer non-banking financial company, and questioned the rationale behind the RBI's directive. He added that the RBI had historically regulated holding companies as NBFCs where they had access to public funds, adding that Tata Sons' status as an NBFC was not in dispute.
The senior advocate further said the RBI had initially indicated in 2019 that companies with access to public funds could remain outside the upper-layer framework under certain circumstances, but subsequently reconsidered its position. He said the regulator's reasoning was that indirect access to public funds could also arise when companies within a group had access to such funds.
He gave an example citing Tata Steel's 4% stake in Tata Sons, which he valued at around Rs 40,000 crore. He said a Tata Sons listing could allow Tata Steel to monetise the stake and deleverage, while continuing to hold the stake would leave the company reliant on dividends from Tata Sons to service its debt.
Salve said the threshold for a company to be classified as an upper-layer NBFC was very high, requiring a company to have a size of more than Rs 1 lakh crore, or around $10 billion. "Tata Sons, roughly valued at $20-25 billion. Tata Group itself plus Tata Sons valued at $270 billion. Our economy will be affected if something happens to Tata Sons," he said.
He said the RBI's direction to list Tata Sons also raised questions around corporate governance and the regulator's oversight of the company's board. "What happens when the regulator says, list yourself? A: Corporate governance runs dry. B: The Reserve Bank has the right of oversight over who comes on the board," Salve said.
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