Tata Legacy at Risk: A Call for Government Intervention

Finance Minister Nirmala Sitharaman ’s statesmanlike response to a query on the Tata issue at the Financial Express Leadership Awards puts to rest dark rumours of the government’s involvement in the fracas roiling corporate India. With great sincerity, she described the matter as sensitive, requiring business acumen, maturity, and cordiality. She affirmed the Tata Group ’s brand value and the Parsi community’s contribution to making Tata a globally recognised name. She also acknowledged the group’s involvement in critical sectors of the Indian economy and stressed the need for an amicable resolution. In a brief personal conversation after the event, she reiterated that she meant every word spoken on the dais. This will be music to the ears of those saddened by the unseemly dissent within the group, who hope its reputation will soon be restored, enabling it to continue benefitting the community and the country. This, however, is not merely an issue of personalities. Mortals, however malicious their intent or devious their machinations, have a shelf life. Institutions committed to the common good, as the Tata Trusts have been for over a century, must endure. The existential threat to the umbilical cord binding Tata Trusts and Tata Sons comes not from individuals but from the RBI’s ill-explained insistence on forcing Tata Sons to list. The perils of listing have been enumerated earlier but bear repeating. First, the covenant between the Trusts and Tata Sons, enshrined in their Articles of Association and underpinning their philanthropic relationship, will be superseded by Sebi’s listing regulations and company law requirements. The freedom with which both entities have functioned will be severely compromised. This independence has enabled Tata Sons to uphold its reputation for fairness, including providing restitution to those who lost money in Tata Finance and honouring commitments in Tata Telecom. Second is the very real prospect of Tata Trusts ’ stake in Tata Sons eventually becoming a minority holding. The SP Group currently holds 18.6% and needs to reduce its debt, potentially through the sale of its Tata Sons shares. At listing, at least 5% would have to be offered for public subscription, gradually increasing to 25%. A future management could also raise capital through rights issues that the Trusts, constrained by restrictions on charitable investments, may be unable to subscribe to. Third is the Tatas’ involvement in critical sectors of the Indian economy, highlighted by their acquisition of the albatross that is Air India. The six largest loss-making subsidiaries of Tata Sons incurred cumulative losses of Rs 68,341 crore between FY23 and FY26, during N Chandrasekaran’s second term. Air India alone accounted for Rs 48,929 crore, or 72% of the total. These losses were absorbed by Tata Sons through TCS dividends and a one-time gain from the Tata Capital IPO. With Air India wreaking havoc on Tata Sons’ bottom line and future earnings, and not even a glimmer of breakeven in sight, which investor would willingly invest in its equity? The government must ask itself whether a listed Tata Sons, driven by quarterly profits and share-price appreciation, would have been able to nurse its unwanted Air India baby. A successful IPO of Tata Sons’ magnitude also requires buoyant markets and favourable investor sentiment. Is it fair for the government to compel a listing when Tata Sons is burdened by losses from an airline it acquired from the government, while simultaneously investing in long-gestation projects of national economic importance? If forced to list, continued losses could severely depress Tata Sons’ share price and undervalue its long-term potential. Is it equitable for the RBI to insist on listing without recognising the exceptional circumstances created by the government itself? Tata Sons has no debt and has not taken a single rupee from the public. It therefore poses no systemic risk. Regulations are not immutable. Exemptions can be granted when circumstances warrant them. The Tata legacy is unique because its guardians have consistently placed trusteeship, philanthropy, and community welfare above personal enrichment. Their financial integrity has been unimpeachable. JRD Tata famously died a pauper, having donated the entire proceeds from the sale of an apartment to a foundation supporting women and children. Such conduct exemplifies the principles that have distinguished the Tata Group for generations. The late Ratan Tata also supported Prime Minister Modi’s vision from the time the latter, then chief minister of Gujarat, invited him to establish the Nano plant in Sanand. That decision reflected the Tatas’ willingness to invest in national development, often beyond immediate commercial considerations. The Prime Minister, home minister and now finance minister have all praised the Parsi community’s extraordinary contribution to India, embodied in the Tata legacy. Yet appreciation must translate into action when the very character of that legacy is threatened. The issue transcends corporate governance, regulatory rigidity, and individual disputes. It concerns preserving an institutional structure that has allowed commercial success to serve a larger philanthropic purpose for more than a century. Compulsory listing risks weakening that structure without any corresponding public benefit. Now is the opportunity for the government to recognise these exceptional circumstances and honour Ratan Tata’s wish that the character of Tata Sons not be destroyed by a forced public listing. Preserving this unique institution would serve not only the Tata legacy but also the national interest. The author is a veteran journalist and promoter of Spenta Multimedia Disclaimer: The views expressed are the author’s own and do not reflect the official policy or position of Financial Express.