Inside the transformation of Tata Trusts: How family equations are shaping the group’s future

The current concern at the $180 billion Tata group is more than just a boardroom battle for control and strategy.

According to two people from Tata’s inner circle and the Mistry families involved, it was the change in sentiment among the actors involved that caused a stir in the boardrooms.

“What appears to be a power struggle in the board is essentially a transformation of old family relationships that have witnessed emotional turmoil in the past, and is witnessing a realignment of interests for a cause dictated by the interest of the community, rather than any business philosophy,” said an individual who is part of the inner circle of the Parsi families involved.

It is learned that all Parsis on the board of trustees of Tata Trusts have come together for the benefit of the Shapoorji Pallonji (SP) group.

This joint is said to have been achieved by the senior women of the Mistry families, the SP group and the Meher Pallonji (MP) group. “There is no minister involved in this part of the drama,” said one of the people cited above. “These women have also reached out to Noel Tata to help the SP group which is still recovering from the sudden death of Cyrus Mistry coupled with the financial stress it is experiencing,” said one of the two people.

The two families, which have had a common patriarch for three generations, have drifted apart over the years and their relationship soured when Cyrus Mistry, who was appointed chairman of Tata Son in 2012, objected to a few large-scale contracts awarded to the MB Group on financial terms that he found too expensive.

In 2016, MP Group’s Mehli Mistry sided with Ratan Tata in his efforts to oust Tata Sons’ Cyrus Mistry. The relationship between the two families became tense after this incident. But that seems to have changed now.

Tata Trusts has seven trustees including chairman Noel Tata, vice-chairman Venu Srinivasan, Millie Mistry, Darius Khambatta, Pramit Jhaveri, Jehangir HC Jehangir and Vijay Singh, whose proposed reappointment to the Tata Sons board led to a standoff that was supposed to be resolved through the intervention of Home Minister Amit. Shah and Finance Minister Nirmala Sitharaman.

Tata Trusts is the largest shareholder in Tata Sons with a 66% stake, followed by SP Group with 18.4% stake. The umbrella arm of the Tata group has 30 listed companies, with businesses ranging from salt to software and automobiles to defence, operating under it.

At the heart of the current conflict lies the list of Tata sons. SP Group is pushing for the holding company to go public in order to liquidate its huge assets that remain locked and inaccessible to the group.

The group has accumulated a huge pile of debt amounting to about $1.2 billion, and is in desperate need of funds. In a statement issued on October 10, the group said the public listing of Tata Sons is not just a financial move, but a “moral and social imperative”.

“We firmly believe that the listing of this pioneering institution will not only uphold the spirit of transparency envisioned by its founding father, Shri Jamsetji Tata, but will also enhance confidence among all stakeholders – employees, investors and the people of India,” the statement said.

But beyond the emotion, the friction had a clock ticking in the background.

Incidentally, the Reserve Bank of India had ordered public listing of Tata Sons by September 30 as per the scope-based regulatory framework it introduced in 2002. This framework classified NBFCs into four tiers based on a few criteria. Due to its extensive investments in group companies and large loans, Tata Sons has been placed in the top tier of the Reserve Bank of India’s classification.

However, the Tata group was not in favor of the listing. Incidentally, it was Tata Trusts that took the lead in directing Tata Sons Chairman Natarajan Chandrasekaran to explore options to keep the listing at bay.

However, at present, a majority of the trustees are said to be in favor of listing Tata Sons to help the SP Group.

However, the Parsis uniting together in the box has put Noel Tata in a difficult position. “On the one hand, the Parsi group expects Noel to stand in unison with them, and on the other hand, the professionals in the group demand that he supports the Tata interest,” said one of the people cited above. This partly explains the rift between Noel Tata and the group led by Mehli Mistry.