Call it an intricate, intriguing, involved, and interesting story about the House of Tata. It has a few cracks, which require the involvement of a new Mistry. There are a few Jacks, like in a pack of cards, who feel they can usurp the existing Queens, Kings, and Aces. A hack, in the form of a cyberattack, has left a leading jewel in the empire prone to a huge loss. Mix in a few financial quacks, who have influenced the forthcoming, high-flyer IPO (Initial Public Offering) of Tata Capital, which involves the sale of shares by the parent, Tata Sons. Now, one gets a sense of the plot that engulfs the Tata Group. It includes different families, professionals, trustees, and technocrats, apart from the usual crop of regulators, and industry shakers.
Tata Sons, the holding company that owns stakes in most of the empire’s most-expensive jewels, is warped in egoistic and regulatory concentric circles. The Reserve Bank of India wants the company to be listed, and the last date is today. Over the years, the company has resisted, and even changed its operations and strategy to wriggle out of the RBI’s listing clutches. It became debt-free, and put in an application to get rid of the non-banking financial company status, which makes it imperative to go public. Tata Trusts, which own a majority in Tata Sons, have categorically asked the latter not to get its shares listed. The Mistry family, which is a minority but powerful shareholder, wants the opposite. Listing will unlock the value of its stake in Tata Sons, and help the Mistry to repay its debts.
Mistry has a long-standing love for the Tata family, which led to the late Ratan Tata anointing the late Cyrus Mistry as the Tata Group’s head. Hate spread because of ego issues and personality clashes, and Cyrus was thrown out in an unceremonious manner. Now, Tata needs Mistry’s help to avoid the listing of Tata Sons. The central bank has hinted that if the shareholders reach a consensus, it may be prone to withdraw its regulatory diktat. There have been recent overtures between the two groups, with Tata Sons’ chairman having reportedly met the Mistry family. There is a succession change in the Mistry family, with Pallon Mistry, the son of patriarch Shapoorji Mistry, having taken over the reins, and Firoz Mistry, son of Cyrus, having joined the board of Afcons Infrastructure.
However, another Mistry, Mehli, the first cousin of Cyrus who sided with Ratan Tata during his public spat with the Mistry family, and who holds a key position in Tata Trusts, has proved to be a headache. Recent reports indicate that this Mistry, along with a few trustees, tried to unduly influence the operations of the trusts, and sideline Noel Tata, who took over after Ratan’s demise, and his supporters. Several trustees, who held allegiance to Ratan, have resigned, possibly due to Mehli-Noel differences, and Noel is slowly inculcating his children in the minor trusts, possibly as a prelude to the entry in the major ones, which hold substantial stakes in Tata Sons. Clearly, Noel is trying to spread his influence and control; Mehli probably feels he holds Ratan’s legacy, and; Tata Sons chairman, a Ratan nominee and a professional, is insecure in some ways.
Yet another angle cannot be ignored. During Ratan’s fight with Cyrus, and after it, the Tata Trusts gained crucial powers over Tata Sons. They do not wish to give them up; a public listing will bring Tata Sons under greater regulatory and shareholders’ scrutiny, which may force the trusts to back off in the future. Sources contend that since the trusts depend on dividends from Tata Sons to fund their welfare activities, they wish to retain control over the inflows. In the recent past, the trusts needed to dig into their reserves to fund their programmes. This was possibly due to the impact of the Covid pandemic, which depressed businesses and profits for a short while. Tussles within Tata Trusts, and with Tata Sons, both overtly and covertly, will need to be resolved by Tata and Mistry families, as well as powerful professionals and technocrats in the group.
Tata Motors, which gained immensely from GST 2.0, like other automakers, lost the momentum. Its plants in Europe, which make premium cars, were hit by a cyberattack, whose impact dragged on for a longer period than originally envisaged. In addition, there was no insurance cover, and billions of dollars seem to be at stake. The premium cars face global backlash due to the environment in China and India. The European operations have dragged down Tata Motors’ consolidated performances for years. The hack seems to have complicated the group’s strategy, which is being sidetracked by the events in Tata Sons and Tata Trusts, among other things. Only yesterday did the Jaguar-Land Rover operations begin to limp back to normal, after a $2 billion support from the UK Government.
Finally, the financial quacks surrounding, and hovering around, Tata Capital, have ruined its IPO. A few weeks ago, the grey market price of the share ruled at over Rs 1,000. It is now down by a third. The downward movement partially pressured Tata Capital to announce a price band of just over Rs 300, which marks a huge discount over the price of the unlisted shares in the grey market. This has trimmed down the issue size and, thus, may reduce the earnings of Tata Sons, which wishes to divest a part of its stake in Tata Capital. Experts contend that the group feared that its unlisted valuation was quite high compared to its peers, and it reduced the issue price band. The market too has faced volatile conditions, and foreign investors have taken out money from stocks in the past few months.
Past experiences indicate that aggressive IPO pricings of financial and other firms have proved harmful to investors. In many cases, the list prices did not offer any upside benefits. Tata Capital does not want to be in the same boat, and seems happy with less-aggressive pricing. An expert told a newspaper that Tata Capital’s price band shows a shift towards conservative IPO pricing, even for a strong company with a “diversified lending stock, and strong parentage backing its growth.”
Still, the buyers in the unlisted market face losses of up to 70 per cent. They may allege manipulations in the grey market. This may prove to be one of the reasons for the market regulator to intervene, and address the issues related to the grey market. At present, some of the pre-IPO private sales are unregulated.
