The Ganesh Chathurti long weekend, when Mumbai virtually stops working, saw a flurry of activity at India’s most storied business house as well as the Reserve Bank of India (RBI). On the face of it, RBI issued a simple regulatory letter on 11th September, rejecting a long pending application from Tata Sons Pvt Ltd (Tata Sons) to voluntarily surrender its registration as a core investment company (CIC). The regulator advised Tata Sons to ensure full compliance with all guidelines applicable to upper-layer NBFCs (non-banking finance companies) which primarily meant listing of the company.
These are not routine actions, by any stretch. They are even more significant when they happen in connection with India’s most prestigious corporate group. It brings to a head the three most pressing matters facing the group:
Listing of Tata Sons and its impact on control over the group by its largest shareholders, the Tata charitable trusts;
An exit for the debt-strapped Shapoorji Pallonji group (SP group) which is the single largest outsider shareholder with 18.37% stake in Tata Sons;
Uncertainty over the continuance of N Chandrasekaran as chairman of Tata Sons, although he has formally informed the board that he wants to step down.
All three issues are inter-linked and the actual picture remains hazy and confused, despite a slew of opinions being aired by official and social media pundits, former Tata executives, proxy advisors and others.
One version of events, from a reliable insider, is that things escalated rapidly after the SP group dashed off letters, to the prime minister’s office (PMO), the finance ministry and RBI, complaining that it was being coerced into selling its stake at a low and arbitrary price without any formal valuation exercise. This happened after a business paper reported of a Tata offer of ₹25,000 crore to the SP group for 7% stake. Noel Tata had conveyed his intended valuation to Shapoor Mistry through Deepak Parekh, former chairman of the Housing Development Finance Corporation (HDFC).
For context, the 18.37% SP stake was recently valued in the ₹2.3 lakh crore–₹3 lakh crore range (roughly US$27billion–US$35 billion) depending on the methodology. It has a debt of roughly ₹60,000 crore at very high interest rates.
The SP group has its back to the wall and the Tata offer was not good enough to pull them out of trouble. A default by the beleaguered group, despite their long and valuable holding in Tata Sons, would be very embarrassing for India with consequences to employees, creditors and many large infrastructure projects. It would be a reminder of the 2018 collapse of Infrastructure Leasing & Financial Services (IL&FS), in a smaller way. What makes this situation more perplexing is that Noel Tata is married to Aloo Mistry, the sister of Shapoor and late Cyrus Mistry.
Was the SP group’s urgent letter reason enough to trigger the 11th September move? Very likely, especially when you take into account previous letters to the PMO by influential Tata trustees expressing concern over the future of the group. One such letter said that the listing of Tata Sons is an ‘institutional safeguard given the leadership vacuum and power-struggle within the group’. Speculation about desperate measures such as splitting Tata Sons, merely to avoid listing, would have only increased this concern.
Moreover, the two-year stand-off between Tata Sons and RBI over complying with listing requirement as an ‘upper layer’ NBFC was already beginning to embarrass the banking regulator and the government.
The systemic shock caused by the collapse of IL&FS, which triggered the decision to ask ‘upper layer’ NBFCs to list, is not a trivial matter. All upper layer NBFCs, barring Tata Sons, have complied. Can the government truly justify an exemption to the US$185bn (billion) Tata group, when it continues to struggle with succession, control and the overhang of huge investments and losses in aviation, semi-conductors and retail businesses?
Pertinently, the group has weathered serious governance storms, such as the sacking of Cyrus Mistry, only because of a reputation built over decades. The Tata empire today operates in a vastly different business environment from the days of Jamsetji Tata or even JRD Tata, but continues to enjoy special privileges available to no other business group.
One issue that may be settled at the Tata Sons’ board meeting on 17th September is the reappointment of N Chandrasekaran for another term. His reappointment, which was cleared by the internal committees, was not formalised because Noel Tata was reluctant to back an unconditional third term without clarity on some of the loss-making businesses of the group.
Media reports suggest the nomination and remuneration committee (NRC) of Tata Sons may formally ask Chandra to reconsider his decision. This would have the backing of the SP group as well as key trustees who believe that he alone can steer a quick listing of Tata Sons. The RBI letter has not specified a timeframe for listing. (N Chandrasekaran To Step down as Tata Sons Chairman, Will Complete Term till February 2027: Reports)
An influential Tata trustee has told the government that a listed Tata Sons would bring greater transparency, accountability, independent scrutiny and institutional discipline to a group of national significance. What is left unsaid is that listing would also dilute the control of Tata Trusts over the operating company through Tata Sons which, in turn, will reduce Noel Tata’s ability to emulate Ratan Tata in controlling the group through a single power centre.
That no individual, irrespective of lineage, should become larger than an institution is a key apprehension expressed by some trustees. It is interesting that this was not a matter of concern when the late Ratan Tata exercised similar power. Was it because he was single and appeared to put in place a professional successor in N Chandrasekaran?
Those who oppose the listing of Tata Sons have argued that the reporting demands and valuation cycles of public markets could conflict with the long-term charitable objectives of the Trusts. Perhaps it is time to address that special dispensation enjoyed by the Tata Trusts and look at how long this legacy can continue.
If charitable work is at the centre of opposition to listing, one needs to revisit another, older question.
Section 13(1)(d) of the Income-Tax Act requires every charitable trust to invest its corpus only in specified modes; under Section 11(5), read with Rule 17C, this effectively means bank deposits, government securities, public-sector bonds and a narrow list of instruments such as mutual fund units — but not direct equity in an ordinary operating company.
Tata Trusts are the lone exception under a grandfather clause exempting shares acquired before 1 June 1973. Their 66% stake in Tata Sons was acquired before this date. Although the exemption was repeatedly challenged (a 2013 comptroller and auditor general audit, an AY14-15 tax inquiry and an attempt to cancel the tax-exempt status of three Tata Trusts in 2019), the Trusts have fought and prevailed. In December 2020, the tax appellate tribunal ruled in its favour.
In July 2025, Maharashtra's charity commissioner, under the state's Public Trusts Act, not the Income-Tax Act, allowed the Trusts to invest up to half their corpus in listed equity, equity mutual funds and similar instruments, drawing on a securities list the Centre had notified in 2017. That liberalises trust law. It does not touch the separate, narrower question of tax exemption: the Income-Tax Act's specified modes still exclude direct equity in an operating company. So the two-track structure survives — trusts can now legally buy listed equity, but none, besides Tata Trusts, can retain full tax exemption on an uncapped, unlisted, single-company holding.
Meanwhile, India's philanthropic landscape has changed dramatically since 1973, especially after economic liberalisation of the 1990s. The Azim Premji Foundation, funded through Wipro shares transferred into trust, is now one of the world's largest endowments (over US$21bn), with Mr Premji personally topping India's giving charts for years. Reliance Foundation runs programmes touching health, education, culture, sports and rural development. The Shiv Nadar Foundation topped the 2025 EdelGiveHurun list with ₹2,708 crore in a single year; Infosys Foundation, Bharti Foundation and JSW/Jindal Foundation all run large, credible, comparably-scaled charitable operations. Yet, unlike the Tata Trusts, none of them can hold a concentrated, uncapped equity stake in an operating company and still retain full income-tax exemption on it — a benefit that could considerably enhance their corpus and their charitable activities. Thousands of small non-government organisations (NGOs) operate under the same straitjacket and their work and funding are heavily impacted by interest rates.
So the fairness question that I am raising is not about the intent. The philanthropic record of the Tata Trusts is definitely real and substantial. But they are no longer the only ones in this space. Is it fair that a permanent privilege based on a 53-year-old cut-off date should persist in a completely different economic environment?
I am willing to bet that the court jester of the BJP will step in to broker peace. The man who says he wants no power but is on the Central Board of the RBI. He will step in to ensure that TamBrahm lobby that is in control will continue to hold sway. The corruption and skeletons that Cyrus wanted to clean out - will remain.
Last week brought a familiar Indian story dressed in a fresh set of numbers: an institution funded by the taxpayer treats its biggest defaulters with far more discretion than it shows an ordinary depositor who is late in updating ...
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