Mumbai: A potential stock market listing of Tata Sons, leadership changes within the Tata group and any restructuring of the holding company’s ownership framework could influence the assessment of support provided to Tata group companies, a report said on Tuesday.
According to a report by rating agency S&P, listing of Tata Sons in its present form would likely be credit-neutral in the near term. However, no immediate rating action is under consideration, it added.
However, the entry of public shareholders could increase scrutiny of capital allocation, dividend policies and financial support extended to group entities, potentially affecting the group’s support framework in the future, it said.
“We currently view Tata Sons as a single, key controlling entity,” S&P said and added that any change that makes the group’s controlling structure less clear or weakens the holding company’s credit profile could affect its assessment of overall group credit quality and the uplift factored into ratings of individual companies.
The comments assume significance as S&P currently incorporates up to three notches of group support into the ratings of several Tata companies, including Tata Steel, Tata Motors, Tata Power, Tata Capital and Jaguar Land Rover (JLR).
According to the report, this is particularly relevant at a time when Tata Steel, Tata Power and Tata Capital are pursuing significant expansion plans, while JLR is undergoing a business transition.
The analysis comes amid an ongoing debate over the future structure of Tata Sons following the Reserve Bank of India’s requirement that the company pursue a public listing.
Recent discussions within the group have centred on governance, succession and possible alternatives to listing.
Separately, Tata Trusts has proposed restructuring Tata Sons through the merger of operating businesses, including Tata Electronics Systems Solutions and Tata Consulting Engineers, into the holding company.
The proposal aims to transform Tata Sons into an operating company structure which could potentially alter its regulatory classification and remove the requirement for a public listing, subject to regulatory and board approvals.
The longer-term credit implications would depend on how control of the group is ultimately exercised, whether the ownership structure changes and if Tata Sons continues its traditional role of supporting strategically important group companies, according to the report.
(IANS)
