Tata Sons Leadership Change, Possible Listing Unlikely to Affect Group Ratings Immediately: S&P Global

The ongoing developments around Tata Sons, including a possible leadership transition and the prospect of a public listing, are unlikely to have an immediate bearing on the credit ratings of Tata group companies, according to S&P Global. 

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The ratings agency expects any changes to the group’s financial policies to take place gradually. Its assessment comes as differences have emerged between Tata group management and its controlling charitable trusts over the reappointment of Chairman N Chandrasekaran and the way forward for Tata Sons following the listing mandate. 

Tata Trusts has proposed a restructuring that could allow Tata Sons to remain unlisted. The proposal follows the central bank’s rejection of Tata Sons’ request to give up its status as a large non-bank finance company. 

The developments have also drawn investor attention because some Tata group companies hold stakes in the unlisted holding company, making the question of a possible Tata Sons listing relevant to their shareholders. 

S&P noted that the Tata companies it rates are managed by independent professional teams, even as Tata Sons continues to have a role in shaping the group’s broader strategy. 

Among the group companies covered by S&P, Tata Steel, Tata Motors, Tata Power, Tata Power Renewable Energy and Tata Capital carry ‘BBB’ ratings with stable outlooks. Tata Motors Passenger Vehicles has a ‘BBB’ rating with a negative outlook, while Jaguar Land Rover is rated ‘BBB-’ with a negative outlook. 

As far as a potential Tata Sons IPO is concerned, S&P sees a routine listing as having no immediate impact on credit quality. 

The picture could evolve over a longer period. A larger public shareholding could bring greater attention to how Tata Sons allocates capital, returns money to shareholders and supports weaker companies within the group. Those factors could eventually influence S&P’s assessment of the level of support available across the Tata group. 

For now, however, the ratings agency does not expect either the possible leadership transition or a conventional listing of Tata Sons to trigger an immediate change in the ratings of group companies.