Tata Sons Listing, Leadership Change Unlikely To Move Group Ratings Soon, Says S&P

S&P Global Ratings said on Tuesday that a possible listing of Tata Sons and a change at the top of the Tata group are unlikely to move the credit ratings of group companies in the near term, as per PTI.

In a report that it said was not a rating action, the agency expected any shift in the group's financial policy to be slow, given the conglomerate's long history and cautious management. A listing and a leadership transition, it said, would have "no immediate impact" on ratings of group entities.

Over the longer term, however, both developments could reshape how S&P assesses group support and financial policy.

S&P rates Tata Steel, Tata Motors, Tata Motors Passenger Vehicles, Tata Power, Tata Power Renewable Energy, Tata Capital and Jaguar Land Rover Automotive. It considers all seven strategically important to Tata Sons, which adds up to three notches to their ratings.

The agency described the companies as run by independent professional teams, though Tata Sons influences their strategy. It said their credit profiles have improved in recent years, partly because of the group's conservative financial policy.

A change in leadership, group structure or stakeholder priorities could raise doubts over whether that strategy and the support behind it would continue, S&P said. Tata Steel, Tata Power and Tata Capital could feel this more, it noted, as each has large growth plans. Jaguar Land Rover is in the middle of a business transition.

What Public Shareholders Would Bring

Tata Sons has been under pressure to list since the Reserve Bank of India rejected its request to deregister as an upper-layer non-banking financial company. S&P said the regulator on August 6 left the listing obligation unchanged.

The Tata Sons board has moved to comply. Tata Trusts, which owns about 66% of the holding company, has opposed the move.

A routine listing of Tata Sons in its current form would be neutral for group credit profiles, S&P said. But bringing in public shareholders would likely draw closer scrutiny of investment decisions, capital allocation and support for weaker group firms. That could shift emphasis to returns, capital discipline, dividends, leverage and accountability for strategic investments, the agency added.

S&P cited Tata Sons' earlier backing of Tata Teleservices as an example of the group's willingness to fund businesses even when the economic case was unclear.

The effect would build slowly, the agency said, given the likely size of an initial public offering and the time public holders would need to become a significant part of ownership.

The listing dispute has run alongside a fight over leadership. On September 17, the Tata Sons board voted to reappoint N. Chandrasekaran as chairman for a third five-year term. He had earlier indicated he would step down when his present tenure ends in February 2027.

Tata Trusts Chairman Noel Tata opposed the reappointment and has challenged its validity. The dispute reflects a wider disagreement between the Trusts and the board over governance, control and the group's future direction.

S&P's current approach to group support assumes Tata Sons is one clear controlling entity, whose strength comes from holding a varied set of companies. The agency rates the holding company's credit quality as solidly investment grade.

Should a restructuring blur which entity is in control, or weaken Tata Sons' own credit profile, S&P said it could revisit its view of group credit quality and the uplift given to individual companies.