This week, the board of Tata Sons - one of India's oldest conglomerates and owner of iconic British brands such as Jaguar Land Rover and Tetley Tea - defied its largest shareholder, Tata Trusts, by reappointing N Chandrasekaran as chairman and backing a public listing of the holding company. Tata Trusts, which owns 66% of Tata Sons called the decision "illegal" under its articles of association and also opposed the listing, setting the stage for a period of prolonged upheaval and possibly a protracted legal drama at Bombay House, the headquarters of the 158-year-old company. For the Tatas, who are no strangers to boardroom battles, a cloud of uncertainty now prevails at multiple levels.
The resolution to reappoint Chandrasekharan, while approved by the board, could be defeated at the company's Annual General Meeting as Tata Trusts is likely to vote against it, putting a question mark over his future. The meeting has to take place before 31 December as per reports, after the previous one was adjourned for lack of quorum, but no new date has yet been announced. "The Nomination and Remuneration Committee (NRC) of the Board of Tata Sons which reappointed him has no power to take this decision.
They can only make a recommendation. Also, their decision flies against the governance code of the company that requires executives to step down from active roles at 65. These are serious lapses," Nitin Potdar, a prominent Mumbai-based corporate lawyer told the BBC.
Chandrasekharan, who got a five-year extension, will turn 65 in 2028. Tata Group stocks first soared and then crashed as the tensions mounted, reflecting hope and uncertainty about leadership and business continuity amid several high-stakes but loss-making bets by Chandrasekharan in sectors like semiconductors and airlines. But beyond the leadership tussle, the bigger question to contend with is the group's public listing, "which now looks increasingly inevitable", Nirmalya Kumar, who previously headed strategy at Tata Sons, told the BBC.
In 2022, India's central bank, the Reserve Bank of India (RBI), classified Tata Sons as an "upper layer non-banking financial company" because of its systemic importance and investment activities. This created a listing obligation on the group. Tata Sons sought to get out of this classification by repaying their debt and arguing that they do not borrow directly from the public markets.
But after sitting on its application for over two years, the RBI rejected the company's bid to get out of the framework earlier this month, pushing the group closer to a stock market debut. In a statement, Tata Trusts reiterated its long-held opposition to going public and said "all available options and not a listing alone" are being explored even though its trustees are no longer unanimous in their position on the matter. Potdar says the regulator has no power to force any company to go public and the issue will almost certainly be legally challenged by Tata Trusts.
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