Mumbai (Maharashtra) [India], September 17 (ANI): The opposition of Tata Trusts to N Chandrasekaran's reappointment as Executive Chairman of Tata Sons could lead to months of uncertainty over his tenure as well as the proposed listing of Tata Sons, according to Shriram Subramanian, Founder and Managing Director of InGovern Research Services.
His comments came after the Tata Sons board on Thursday approved Chandrasekaran's reappointment as Executive Chairman for another five-year term after he agreed to reconsider his earlier decision not to seek another term. However, soon after this decision, Tata Trusts said in an official statement that it maintains the position that the resolution to reappoint Chandrasekaran is illegal.
Subramanian said the Tata Sons board's decision was not unanimous and that most directors appeared to favour continuity, particularly in view of the impending IPO of Tata Sons.
"The reappointment of N Chandrasekaran by the board of Tata Sons, though it was not a unanimous decision…probably the directors, most directors felt that there is a need for continuity because of the impending IPO," Subramanian told ANI.
He said the Tata Sons board's decision also points towards efforts to comply with applicable Reserve Bank of India (RBI) guidelines, including those relating to listing.
However, the expert said the disagreement with Tata Trusts could now become a key issue.
"It looks like Tata Trusts are going to contest it. So there is a likelihood that this will either head to courts or this is creating friction between the trusts and Tata Sons," he said.
Subramanian said both Chandrasekaran's reappointment and the proposal to raise equity capital through an IPO would have to be placed before Tata Sons shareholders for approval.
Tata Trusts is a large shareholder in Tata Sons and, according to Subramanian, its position could therefore have a significant bearing on the outcome.
"It looks like Tata Trust did not want this decision. So it is likely these decisions are likely to be voted out by Tata Trust as a shareholder," he said.
He added that the matter could come up at the Annual General Meeting (AGM) later this year and could potentially remain unresolved unless there is a way to convince Tata Trusts Chairman Noel Tata.
The Trusts said Chandrasekaran had communicated to the Tata Sons board on August 12 that he would not offer himself for reappointment after the end of his current tenure on February 20, 2027.
Subramanian said the disagreement could result in further uncertainty over both Chandrasekaran's tenure and the Tata Sons listing.
"It is quite unfortunate that there will be some more months of uncertainty there on both the decisions because Tata Trusts are not agreeing to the decision taken by Tata Sons," he said.
He also pointed to the importance of the shareholders' position in the matter, saying that the shareholders' position prevails over the board under the Companies Act.
"So to that extent, Mr Noel Tata and Tata Trust's views may overall prevail," Subramanian said.
He said the situation was particularly notable given Tata Group's reputation for corporate governance, adding that the lack of a unanimous decision had created a new point of friction between the Trusts and the Tata Sons board.
The Tata Group is a massive global conglomerate, but its unique ownership structure means it is not controlled by a single family.
At the centre of this ecosystem is Tata Sons, which acts as the principal investment holding company and promoter for all the diverse operating companies within the Tata Group (such as TCS, Tata Motors, and Tata Steel).
In turn, Tata Sons is primarily owned by Tata Trusts, a collective of philanthropic organisations (led primarily by the Sir Dorabji Tata Trust and the Sir Ratan Tata Trust) that holds a 66 per cent equity stake in the holding company.
Consequently, the profits generated by the Tata Group companies flow back to Tata Sons as dividends, which then fund the massive public charitable, health, and education initiatives run by the Tata Trusts. (ANI)
Tata Trusts opposition could create months of uncertainty over Chandrasekaran’s tenure, Tata Sons IPO: InGovern
