The Tata Group, an Indian salt-to-steel conglomerate, is experiencing internal rifts and facing business challenges. These developments follow the death of Ratan Tata a year ago. A boardroom dispute between trustees has reportedly led to government intervention to prevent a public legal conflict, similar to the one that occurred in 2016 when former chairman Cyrus Mistry was removed. Reports suggest the ousting of Mehli Mistry, a trustee on the board of Tata Trusts, though the BBC has not independently verified this. This situation coincides with the group's expansion into new sectors and efforts to revive Air India, which it acquired in 2021.
Governance and Structure
Professor Mircea Raianu of the University of Maryland described the current situation as "unresolved business" concerning control within Tata and the extent of decision-making authority held by Tata Trusts, the majority shareholder. Tata Trusts, a philanthropic arm, holds 66% of Tata Sons, the unlisted commercial holding company. This structure provides the group with tax and regulatory advantages and facilitates charitable activities. However, experts indicate that it also presents governance challenges due to its dual non-profit and commercial objectives.
The reported discord involves disagreements among trustees regarding board nominations, funding approvals, and the potential public listing of Tata Sons. Tata Sons is the holding company for 26 publicly listed Tata firms, with a market capitalization of approximately $328 billion.
A source close to the Tata Group indicated that some trustees seek increased influence in strategic decisions and nominee selection for the Tata Sons board. Tata Trusts has three nominees on the Tata Sons board, possessing veto rights in significant company decisions. The source noted that while their role is understood to be supervisory, some trustees now desire more involvement in commercial decisions.
Public Listing Debate
A key point of contention is the SP Group's desire to take Tata Sons public. The SP Group is the largest minority shareholder, holding an 18% stake. While the SP Group advocates for a public listing, most Tata trustees reportedly oppose the idea.
Reasons cited by a source for the trustees' opposition include concerns that a public listing could dilute the Trust's decision-making capacity and long-term focus, exposing Tata Sons to quarterly market pressures. This concern is heightened due to many new businesses being in nascent stages.
Conversely, the SP Group has characterized a prospective public listing as a "moral and social imperative," stating it would unlock value for Tata shareholders and enhance transparency and governance within the company. Neither Tata Sons nor Tata Trusts have responded to the BBC's detailed questions.
Professor Raianu noted that a public listing would contrast with a trend observed in some large conglomerates in the United States and Europe, which are opting for foundation ownership to promote stability and sustainability. However, Professor Raianu also stated that private or closely held companies are subject to less external scrutiny, which can contribute to conflict and affect reputation.
Recent Business Developments
The internal discussions have drawn attention to governance and brand perception, according to publicist Dilip Cherian. Recent events include an Air India crash earlier this year and a cyber-attack on a Jaguar Land Rover (JLR) unit in September, which impacted UK car production.
TCS, the group's flagship software outsourcing company, which contributes nearly half of the group's revenues, has also faced challenges, including workforce reductions and the termination of a $1 billion contract by Marks & Spencer. Mr. Cherian stated that these boardroom discussions create uncertainty for investors regarding share performance and the group's leadership.