- Noel Tata opposed listing Tata Sons, fearing profit could overshadow philanthropy
- He emphasised charity owns commerce, funding public goods like hospitals and relief
- Keeping Tata Sons private helps support struggling group firms and maintain unity
Tata Trusts Chairman Noel Tata on Saturday made a forceful case against listing Tata Sons, as he warned that bringing in tens of thousands of public shareholders could push profit ahead of philanthropy and change how the group has worked for generations.
“My worry is that listing, which is what some people are proposing, will change this way, this Tata way,” Tata said at the HT Leadership Summit. “And one day, if we have 30,000, 40,000 shareholders, profit may take precedence over philanthropy. And I think that would fundamentally change the Tata way of working.”
Tata built his argument around what he called a single premise. “Charity precedes commerce. Charity owns commerce. It's not the other way around,” he said.
“Dividends from some of our listed companies, which come through the channel, become tomorrow's hospitals, tomorrow's flood relief, tomorrow's education institutions, tomorrow's relief for people in crisis,” Tata said. “This profit becomes, in a way, a public good... It repeats itself every year, year on year, by design.”
“In this particular case, the owner cannot die. The owner cannot be bought. And the owner cannot retire. So there is a continuity in the Tata way,” he said.
‘Important Glue'
Tata said keeping the holding company private also lets it support group firms in difficulty. “The other thing that staying private does is Tata Sons remains the backstop for all or any Tata companies that ever gets into trouble. And that is an important glue which keeps the entire group together,” he said.
Outside investors, he said, would be within their rights to question such support. “The moment you have a separate set of investors in Tata Sons from a separate set of investors in a company that requires funding, they're quite right to ask, why do we want to make investments here? You should only be making investments in what will deliver and allocating capital to the most profitable ventures. And therefore the nature of the group is going to change.”
“Why tinker with something that has delivered such value for 150 years? Why do we want to change that?” he asked.
Tata said the Trusts would “play a constructive role with the regulators, with others, to try and find a solution which keeps the Tata way the way it is.”
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Listing Row
The remarks come as the listing question has divided the group's leadership. The RBI rejected Tata Sons' application to surrender its NBFC registration in September, effectively closing the route the company had pursued to avoid the listing requirement. Tata Sons is, therefore, back under the regulatory framework applicable to an upper-layer NBFC, which entails a listing requirement.
At a board meeting on Sept. 17, the board approved a fresh five-year term for executive chairman N Chandrasekaran, with Noel Tata the only director to vote against. The board decided to proceed with a public listing rather than challenge the RBI decision, which Tata opposes.
Tata Trusts own about 66% of Tata Sons, while the Shapoorji Pallonji Group holds 18.38% and has consistently advocated the public listing of Tata Sons. Within the Trusts, Vice-Chairmen Venu Srinivasan and Vijay Singh have backed the Tata Sons board's decision to reappoint Chandrasekaran and argued that the company must respect regulatory requirements, including the RBI's listing framework.
Tata did not name any individual or group in his remarks.
‘Direction Is Fine'
Tata also addressed Tata Sons' performance. He said he backed the group's strategy but questioned how it was being carried out.
“The strategic direction, as I've said now twice or thrice, remains the same. Philanthropy on one hand, nation building on the other hand. This is independent of the leadership, of personalities. This is embedded in the DNA of the group,” he said.
“I have not asked or questioned the direction of what we've done. I question sometimes the delivery of what we're doing,” Tata said. “The question is, do we have the discipline when we execute projects and not the direction? How will projects with a long gestation period succeed if we don't have discipline? And how will we allocate capital to those projects?”
“So very clearly, direction is fine, but we also need discipline of execution in these very large projects,” he said.
Tata said he saw a twofold role for the Trusts: direct philanthropy, and investing through Tata Sons “to invest and nurture projects of national importance”. He pointed to the group's semiconductor project, an EV battery plant and phone assembly for export.
These projects, he said, have “a longer gestation” and “might have a little more risk than a normal project, but the hope is that eventually those projects will become public companies and prosper in the marketplace” once incubated.
On philanthropy, Tata said the Trusts plan to build “40, maybe 50 general purpose hospitals in very, very underserved parts of the country”. They will be not-for-profit, and “we're starting on that program going forward,” he said.
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