Why Tata Sons is Reluctant to Launch an IPO

India’s biggest conglomerate, Tata Sons, has recently paid off a HUGE debt.

₹20,300 crore paid in full! 💥

Oh, wait! Don’t assume that the company is facing some financial trouble. Not at all!

• Operating in → 100 countries across 6 continents
• M-cap of all-listed Tata group firms →  over ₹21.70 lakh crore (as of Sep, 2022)
• 1 of India’s biggest employment providers → more than 9.35 lakh employees

All the above data illustrates Tata Sons' prominence.

In fact, it has voluntarily paid this big debt. Before we get into the why of it, let's take a look at its financials.

The company is doing well, and the figures below are its evidence: 25% revenue hike– from ₹35,058 crore in FY23 to ₹43,893 crore in FY24

It’s not wrong if I say that Tata has built an unbreakable bond with its consumers. After all, we have been using many of its products for almost decades, haven’t we?

• Tata Salt “Desh ka namak”
• Tata Sky “Isko laga dala toh life jhingalala”
• Tata Tea “Jaago Re”
• Titan “Be more”

These are just a few of its brands which have become a part of our daily lives.

Now, let’s talk business!

Many companies dream of functioning bootstrapped, but taking a loan to function well is also a viable path. It’s even quite common!

But the real question is, what’s the reason to pay such a jaw-dropping sum?

Scroll down to find out.

Why Tata Sons Paid Off This Big Debt

The answer is simple and short– so that it doesn’t have to go public.

Yes, you read it right!

While many Tata companies are already listed (like Tata Consultancy Services (TCS), Tata Steel, Tata Motors, Tata Consumers, etc.), Tata Sons prefers to remain unlisted in the stock market.

In September 2022, RBI announced Tata Sons as a Non-Banking Financial Company—Upper Layer (NBFC-UL). As per this, companies have to get listed within 3 years. But now, after this substantial debt repayment, the group has exempted itself from the listing requirement and willingly gave up its NBFC registration.

Think about it—how many companies voluntarily pay off such a massive debt just to stay unlisted? It almost proves Tata’s commitment to remain independent and work for India’s progress. For example:

• Tata Nano, the world’s cheapest car at the time, represented India’s auto-manufacturing capability, all thanks to Ratan Tata’s vision. However, even with a price range of ₹2 lakh, it is now discontinued due to its low demand.
• Mr. Tata even acquired Ford’s struggling Jaguar and Land Rover, and today both are renowned luxury car brands worldwide.

Tata acquired Jaguar and Land Rover in 2008 for $2.3 billion (around ₹19,090 crore). By 2023, these car brands achieved record annual revenues of £29 billion (₹2,95,278 crore), with luxury models like Range Rover boosting sales.

Whatever the reason for staying private, it’s the company’s internal matter, which has to be respected. However, Tata Sons has maintained its consumers’ trust factor throughout the years, which cannot be said for every big fish in the market (cough…Adani…cough).

Tata Sons Debt: Transaction's Further Details

After this debt payment, only ₹363 crore in non-convertible debentures and preference shares remain to be paid by Tata.

In addition, this holding company deposited ₹405 crore with SBI and provided an undertaking to the RBI as part of voluntarily surrendering its NBFC licence certification.

This action means that the company voluntarily gives up its authorisation to engage in NBFC-related activities like providing loans, accepting deposits, or offering financial products.

This matters because it will help keep operations flexible and, most importantly, reduce regulatory burdens.

How did Tata Become Desh ka Bharosa?

Jamsetji Tata was the person who founded what today has become the Tata Group. Tata Sons is a core investment holding company registered under the RBI.

As the official website of Tata Group states, the company's mission is “to improve the quality of life of the communities it serves globally through long-term stakeholder value creation based on leadership.” Because, obviously, changing the world and raking in profits are just two sides of the same coin. Right?

• In 1868, with a vision to build a nation, Jamsetji Tata founded a trading company with just ₹21,000.
• His vision led to the opening of the Taj Mahal Hotel in Mumbai (then Bombay) in 1903.
• After he died in 1904, his sons, Sir Dorabji Tata and Sir Ratan Tata, carried forward his legacy.
• In 1907, they marked India's entry into heavy industry by founding Tata Iron and Steel Company (now Tata Steel).
• Under JRD Tata’s leadership from 1938, the group expanded into new sectors.
• In 1932, it stepped into aviation with Tata Airlines, which later became Air India.   

The group's diversification continued with the founding of TCS in 1968, positioning India on the global IT map.

Tata Sons also pursued global expansion by acquiring brands like Tetley, Corus, and Jaguar Land Rover, cementing its international presence.

In 2021, Tata Sons reacquired Air India, bringing the airline back into the fold after 68 years.

Talking about Air India, hope you know about its merger with Vistara. Don’t worry if you’re not aware. Read its whole story, which we have recently covered.

The visionary leadership of Jamsetji Tata and the continued dedication of his successors have driven all these achievements to Tata Sons.

Why are we reminiscing about Tata's backstory? It's because Tata Group is everywhere!

It doesn’t matter if you are a Millenial or a GenZ; you've likely touched a Tata product in your life, whether you realise it or not. Be it a Titan watch on your wrist, the Tanishq jewellery you cherish, or the Tata Steel that built your city–  Tata is literally everywhere.

Now, after understanding Tata Sons' foundation story, it is equally important to know about its subsidiary companies and the sectors in which it operates.

Tata Sons's Subsidiaries

As of 31 March 2023, the company and its subsidiaries have 38 associates and 37 joint venture companies.

These subsidiary companies are engaged in diversified businesses as presented in the infographic below.

And, as of 31 March 2024, TCS (74%), Tata Motors (48%), and Tata Investment Corp. (68%) are the company’s three major subsidiaries.

Together with its divisions, subsidiaries and a joint venture entity, Tata Sons has a presence in multiple business sectors, including:

• Strategy and Management Consulting
• Data Analytics
• Healthcare Diagnostics
• Education Technology
• Health Sciences
• Biosciences, etc.

This strong presence across diverse sectors is further supported by Tata Sons' strategic investments. Over 90% of the company's net assets are invested in various Tata companies, as highlighted in its 2023-2024 Annual Report.

While Tata Sons' subsidiaries have the freedom to run their own operations, this freedom is balanced with a commitment to maintain corporate governance standards.

With multiple subsidiaries and its numerous products operating under the name of Tata, there comes the necessity of protecting the brand’s ownership. Tata Sons owns the Tata brand and its associated trademarks, and the ownership is protected through Brand Equity & Business Promotion (BEBP) agreements.

These agreements licence the Tata brand to group companies, requiring them to adhere to the Tata Code of Conduct and the Tata Business Excellence Model. For your easy understanding, the BEBP agreement means that every company using the 'Tata' brand is a signatory under Tata Sons.

Now, let’s focus on understanding the group’s overall business. With soaring net profits, increased revenues, cost-cutting measures, return on equity growth, and substantial cash reserves, enough money was accumulated to cover the debt repayment.

• Compared to FY23, Tata Sons’ net profits increased by 57% to ₹34,654 crore
• Its total expenses dropped by 27% from ₹3,794.70 crore in FY23 to ₹2,776 crore in FY24
• Effective cost management and resource optimisation have drastically reduced its expenses
• The company has achieved a 38.15% Return on Equity (ROE) before exceptional items and tax

Also, Tata Sons's market valuation rose 35.7%, reaching ₹15.21 lakh crore by the end of FY24, compared to ₹11.21 lakh crore in the previous year.

Tata Sons holds significant equity stakes across a diverse range of key Tata Group companies. You can find its detailed information in the next section.

Tata Sons' Holdings

Tata Sons' stakes in listed entities range from 25% to over 70%. With this substantial ownership, the holding group maintains control over these companies and influences their strategic direction.

Around 66% of Tata Sons' equity capital is held by philanthropic trusts, such as the Sir Dorabji Tata Trust and the Sir Ratan Tata Trust. These charitable trusts utilise the funds for vital causes like education, health, livelihood generation, and cultural development.

Tata Sons’s revenues primarily come from two sources: Dividends and Brand Fees.

• Dividends: Income from dividends is received from Tata Sons' shareholdings in Tata Companies. In FY24, around ₹33,174.2 crore came from dividends and share buybacks, which proved massive in paying the debt amount.
• Brand Licensing Fees: The additional revenue which Tata Sons earns from the fees paid by group companies for using the Tata brand. In the fiscal year 2023, this income amounted to ₹1,008 crore.

Its highest ownership is in Tata Consultancy Services (TCS), a major contributor to its financial success. Around ₹9,362 crore in the debt repayment amount was through the sale of 0.65% of TCS shares earlier this year.

As you can see from the infographic above, the group also has considerable stakes in Tata Motors (48.36%), Tata Steel (33.19%), Tata Chemicals (37.98%), and other leading subsidiaries across sectors like hospitality, power, telecommunications, and retail.

Tata Sons' Market Dominance & Future Plans

The company is investing to leverage India’s growth opportunity and the industries in which its subsidiaries operate.

Tata Sons is leading India's transition to sustainable energy. Tata Power is investing in solar energy and aims to achieve a 100% green energy portfolio by 2045. This bold vision shows the company’s commitment to positioning India as a global leader in renewable energy innovation.

In the global transition from traditional vehicles to electric vehicles, Tata Motors has achieved the number 1 rank in the EV segment in India with a market share of ~72%.

Along with all these, its businesses, such as TCS and Tata Elxsi, are transforming with the emergence of AI/Data. And its global manufacturers are on the edge of creating a more diversified and resilient supply chain.

These holdings allow Tata Sons to make strategic decisions, maintain a dominant position in the Indian market, and support global expansion.

Tata Motors, its automobile subsidiary, has achieved a milestone that reflects Tata Sons' global expansion strategy. Tata Motors is now among the top 10 most valuable car companies worldwide after reaching a market value of around $51 billion (~₹4.2 lakh crore).

Quick question, while talking about AI’s emergence and the fascinating advancements in it, how are you sensing the rapid growth of AI technologies in our daily lives?

We’ve covered a separate article on ChatGPT and its impact on various industries. Feel free to check it out here and get insights about AI’s entry into our lives.  

Are you excited about the possibilities, or do you have concerns about its consequences?

Do share your valuable thoughts in the comments below!

Tata Sons' Fundamentals: Is The Business Profitable?

Each Tata company operates independently under the guidance of its own Board of Directors. This decentralised structure allows flexibility and responsiveness to market conditions while aligning with the group’s values.

Over the past three years, the holding company has experienced fluctuations in revenue, profitability, and performance metrics.

While revenue showed continuous growth, profitability did not follow a consistent trend, with net margins peaking in 2022 and then declining in 2023.

Return On Equity (ROE) followed a similar pattern, highlighting the challenges in maintaining profit efficiency despite increasing revenues.

The debt-to-equity ratio remained relatively stable, indicating steady financial strength.

Overall, the fluctuations, especially the profit, suggest underlying operational and market challenges that need to be addressed for sustained long-term growth.

The Bottom Line

Tata Sons is a holding company; it doesn't have a dedicated sector. However, its business portfolio is vast because of said subsidiary companies.

You can even imagine Tata Sons saying, “You name it, and we have it”. 🤭

As we’ve reflected on Tata's influence in our lives & the market, it’s hard to ignore the recent buzz around their plans to launch 8 IPOs.

Learn all the details of these upcoming IPOs and what they might mean for Tata Sons by clicking here.

With the company's diverse portfolio, could these IPOs be a move to shift towards increased transparency and accessibility for investors?

Moreover, what’s your take on this debt repayment? Is the decision to repay such a huge amount just to remain unlisted worth it? Would you like to see Tata Sons listed?
Drop your thoughts in the comments below!

Also Read:

• Tata Sons: The Heir Misfortune
• Jamsetji, JRD, Ratan -The Trio who built Tata Group of Companies
• What are the Reasons Behind the Downfall of Air India?