Shifting equations inside Tata Trusts put spotlight on Tata Sons’ future

Mehli Mistry, who was ousted from the Trusts a few weeks ago, also opposed the listing during his tenure.

The internal divide within the Tata Trusts, which together hold more than 60 percent of Tata Sons, is playing out in the public domain--- with leaked emails flying back and forth--- even as as the question of whether the Tata group’s powerful holding company should be listed becomes a key bone of contention. People familiar with the matter say the outcome of this debate could fundamentally alter the balance of power that has long shaped the governance of the Tata conglomerate.

Moneycontrol reported on Friday that longtime trustee and senior advocate Darius J. Khambata, in a letter addressed to Trust chairman Noel Tata, reiterated his opposition to any proposal to list Tata Sons. According to people aware of internal discussions, Khambata is joined in this view by trustees Pramit Jhaveri and Jehangir H.C. Jehangir.

Mehli Mistry, who was ousted from the Trusts a few weeks ago, also opposed the listing during his tenure. Their stance broadly aligns with the view held by Ratan Tata during his lifetime.

People close to the situation that the two key stakeholders are the Tata Trusts, the majority shareholders, and the operating management of Tata Sons. Both sets of stakeholders face different incentives when it comes to listing making the outcome less than certain.

Equation Among Trustees

Despite the opposition expressed by Khambata, several other trustees are said to be open to considering the idea, marking a departure from the consensus-driven functioning that characterised the Trusts in earlier years. Insiders say Noel Tata, who was initially seen as open to examining the feasibility of a listing, may now be having a rethink. Furrher, according to these people, the rejection of Neville Tata’s induction into the Sir Ratan Tata Trust on technical grounds by trustee Venu Srinivasan may have shifted internal dynamics. Much, they said, may depend on whether Neville’s appointment is finally cleared for induction into the Sir Ratan Tata Trust if his name is placed before the board once again. His induction into the Sir Dorabji Tata Trust was unopposed.

Adding to the evolving equation is the induction of Bhaskar Bhatt into the Sir Dorabji Trust. Bhatt, long seen by insiders as close to Noel Tata, is viewed as strengthening Noel’s influence inside the Trust ecosystem. Observers say these developments reflect Noel Tata’s efforts to cement his control over the Trusts.

A Question of Control

At its core, the debate centres on control. The Tata Trusts’ dominant ownership stake gives them sweeping influence over the composition of the Tata Sons board, the selection of its chairperson and significant strategic decisions. Listing Tata Sons, insiders said, would naturally weaken this concentrated authority.

A public listing would bring deeper regulatory scrutiny, stronger minority-shareholder rights and statutory governance frameworks that reduce unilateral influence — a shift that would especially empower the Shapoorji Pallonji Group, which at over 18 percent is the single largest minority shareholder in Tata Sons.

The listing debate is all the more sensitive because Tata Sons functions as the incubator for the group’s next wave of businesses, including electronics manufacturing, semiconductors, defence and other emerging high-technology ventures. Many of these initiatives require large, rapid, and confidential capital deployment. As a private company, Tata Sons enjoys significant financial flexibility, allowing it to fund these ventures without public disclosures or quarterly scrutiny. Experts believe that this manoeuvrability would shrink if the company is listed, as heightened compliance and disclosure requirements could erode competitive secrecy and constrain long-term strategic bets.

Further, corporate governance specialists point out that indirect control by the Trusts may face natural limits if Tata Sons becomes a listed entity. Listing brings increased transparency norms, enhanced shareholder protections and regulatory checks that distribute authority more broadly and make internal influence harder to exert discreetly.

Applicability of Article 121

Legal experts say Tata Trusts cannot retain any form of veto rights in Tata Sons once the holding company lists, as Sebi regulations prohibit promoter groups in listed companies from having such special powers. This directly affects Article 121A (often referred to as Article 121), a provision in the Tata Sons Articles of Association that currently grants Trust-nominated directors veto authority over major decisions, including leadership changes, amendments to the Articles, and large-value investments. The Supreme Court has upheld these protections in the past, while clarifying that they must operate within the confines of company law. Once Tata Sons becomes a listed entity, however, Article 121A cannot legally continue in its current form.

In this scenario, the balance of power will depend entirely on the post-listing board composition. If the number of board seats remains unchanged, Tata Sons will be required to appoint two independent directors, leaving four non-independent seats. Of these four, the Shapoorji Pallonji Group, which owns 18.3 percent of Tata Sons, may secure one seat. That would leave the Tata Trusts with three board seats, which is insufficient for any form of blocking power.

However, experts point out that the picture changes significantly if the total board strength is increased. If Tata Sons expands the board to nine members, the Trusts would likely secure five board seats, placing them in clear and undisputed control even without any formal veto rights.

“As per rules, controlling shareholders like Tata Trusts cannot have veto rights in Tata Sons if the latter lists on stock exchanges. However, controlling shareholders don’t explicitly need veto rights to exert control. Practically, if they have influence over the board, they can determine the outcome of key resolutions,” said Amit Singhania, founder of Aretee Law Offices.

SP Group’s Troubles

It is also noteworthy that the SP Group has, over the past few years, made several representations to the government, urging it to nudge the Tata Group toward a listing of Tata Sons. People aware of the matter say these approaches reflect the severity of the SP Group’s financial position and the scale of its obligations. A potential collapse of the SP Group, they added, would carry serious implications for the wider financial system, especially India’s foreign capital ecosystem.

Several large overseas lenders — primarily from the US and Europe — have significant exposure to the group and have extended funding against the SP Group’s stake in Tata Sons as collateral. Any distress on that front could ripple through the system, given the size of the liabilities involved and the sensitivity of foreign-credit channels linked to Indian conglomerates.