Tata Sons' IPO can undermine company's role; may not appeal to investors: Former VC NA Soonawala

Tata Sons’ possible listing, that has been the point of a widely-discussed debate, extends beyond regulatory compliance, argued former Tata Sons vice chairman NA Soonawala. Tata Sons, though classified as an NBFC and Core Investment Company (CIC), fundamentally operates as the holding and promoter entity of the Tata Group. Historically, it has consistently complied with RBI regulations by restructuring whenever required, while preserving its identity as a privately held institution.

The listing could alter Tata Sons’ traditional role within the Tata Group, argued Soonawala in an article on Times of India. Historically, it has acted not merely as an investor, but as a custodian of group values and stability. From supporting Tata Steel during crises to honouring obligations in Tata Finance and Tata Teleservices despite commercial disadvantages, Tata Sons has often prioritised reputation, trust, and long-term responsibility over immediate returns. A listed structure, accountable to institutional and foreign shareholders focused primarily on profitability, may limit such flexibility and weaken the group’s internal support system, he said.

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Tata Sons has in the past demonstrated regulatory discipline without altering its long-standing ownership structure.

The current push for listing, triggered mainly by asset size crossing ₹1 lakh crore, raises broader questions, said Soonawala. At a time when growth is encouraged, compelling a century-old holding company to change its structure because it became too large appears contradictory. 

Timing also remains a concern. The group currently faces substantial financial commitments from Air India, long-gestation projects, and newer ventures. Full disclosure of these obligations and subsidiary losses in an IPO prospectus may not appeal to sophisticated investors, suggesting that even if listing becomes inevitable, postponement could be prudent.

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Equally important is Tata Sons’ ownership philosophy, he said. Around 66 per cent is held by Tata Trusts, ensuring dividends ultimately support philanthropic initiatives. Listing may create pressure for higher distributions and short-term returns, potentially diluting this unique model of combining enterprise with social purpose.

There is also the question of whether listing would unlock value or improve governance, said Soonawala. Holding companies in India typically trade at steep discounts to net asset value, whether listed or unlisted. Moreover, governance failures are not uncommon even among listed companies, indicating that listing alone does not guarantee better oversight.

Ultimately, forcing Tata Sons to list risks disrupting a structure built over more than a century — one that balances commercial success, long-term stewardship, and philanthropy.

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