Tata Sons listing, leadership transition may reshape group's long-term financial strategy: S&P Global

A potential listing of Tata Sons and a leadership transition at Tata group are unlikely to have an immediate impact on the credit ratings of group companies but could reshape the assessment of group support and financial policy over the longer term SampP Global Ratings said on TuesdaySampP said any changes to the groups financial policies were likely to be gradual citing Tatas long history and conservative management approachA potential listing of holding company Tata Sons and leadership transition at the group would therefore have no immediate impact on our ratings on group entities SampP said in a report that does not constitute a rating actionThe ratings agency said it views the rated Tata companies as being run by independent professional management teams although Tata Sons influences their strategySampP currently rates Tata Steel Ltd Tata Motors Ltd Tata Motors Passenger Vehicles Ltd Tata Power Co Ltd Tata Power Renewable Energy Ltd Tata Capital Ltd and Jaguar Land Rover Automotive PLC It considers all of them strategically important to Tata Sons resulting in up to three notches of group supportHowever a change in leadership group structure or stakeholder priorities could raise questions about the continuity of Tatas strategy and financial policy as well as the likelihood of group support over the longer term SampP saidThe issue could be particularly relevant for companies including Tata Steel Tata Power and Tata Capital which have significant growth plans while Jaguar Land Rover is undergoing a business transitionTata Sons the holding company of the salttosoftware cars and airline Tata group has been under pressure to list after the Reserve Bank of India RBI rejected its request to deregister as an upperlayer nonbanking financial companyThe companys board has moved to comply with the listing requirement while Tata Trusts which owns about 66 per cent of Tata Sons has opposed the move The listing could bring greater public scrutiny of the holding companys capital allocation investments and support for group businessesThe listing dispute has coincided with a boardroom tussle over leadership Tata Sons board voted on September 17 to reappoint N Chandrasekaran as chairman for a third fiveyear term after he had earlier indicated he would step down when his current tenure ends in February 2027 Tata Trusts Chairman Noel Tata opposed the reappointment and has challenged its validity exposing a broader disagreement between the Trusts and the Tata Sons board over governance control and the groups future directionSampP said the credit profiles of Tatas rated companies had improved in recent years partly benefiting from the groups relatively conservative financial policyThe Reserve Bank of India on August 6 kept unchanged Tata Sons obligation to list SampP said A routine listing of Tata Sons in its current form would be neutral for the credit profiles of Tata group companies it addedHowever bringing public shareholders into Tata Sons could increase scrutiny of investment decisions capital allocation and support for weaker group companies potentially placing greater emphasis on financial returns capital discipline shareholder distributions leverage and accountability for strategic investmentsSampP pointed to Tata Sons previous support for Tata Teleservices Ltd as an example of the groups willingness to provide financial backing even when the economic benefits were not apparentThe impact of a listing is likely to emerge gradually however given the size of a potential Tata Sons initial public offering and the time it would take for public shareholders to become a significant part of the ownership structureSampPs current assessment of Tata group support is based on Tata Sons being a single key controlling entity whose strength comes from its ownership of a diversified portfolio of companiesThe agency said it assesses Tata Sons credit quality as solidly investment gradeAny change in structure that makes a clear controlling entity less obvious or weakens the holding companys credit profile could affect our view of the groups credit quality and thereby the notch up for individual ratings SampP saidThis story has been sourced from a third party syndicated feed agencies Midday accepts no responsibility or liability for its dependability trustworthiness reliability and data of the text Midday managementmiddaycom reserves the sole right to alter delete or remove without notice the content in its absolute discretion for any reason whatsoever