Tata Sons’ IPO can take a page from a Hong Kong titan

India’s 158-year-old Tata Group wants its holding company to stay private. But since regulatory pressures are making it difficult to hold off a stock-market listing indefinitely, it can perhaps learn the virtue of simplicity from an even older conglomerate: Hong Kong’s Jardine Matheson.

Last week, the Reserve Bank of India retained Tata Sons Pvt. on its updated list of systemically important shadow lenders. All 17 firms on that list have to be publicly held — and 16 of them already are. Although Tata Sons has offered to surrender a key registration to bypass the rule and avoid an initial public offering, no decision yet on its application leaves the nerve center of the $350 billion empire with little choice except to start preparations to go public.

To be forced to do an IPO is bound to exacerbate the deep-seated tension between the two biggest shareholders in the holdco. On one side sits the 66% majority owner: the philanthropic trusts that fear loss of control and the inevitability of a holding-company discount, post-IPO. On the other side sits the Shapoorji Pallonji Group, an 18.4% minority shareholder locked in an illiquid asset.


The SP Group, a pedigreed construction and engineering business, can’t sell its Tata Sons shares without the latter’s approval. SP’s controlling shareholder, the Mistry family, is joined to the Tata clan by ties of kinship. However, those bonds have been strained by a decade-long corporate dispute. Liquidity-strapped and facing heavy debt service costs, SP has openly demanded an IPO or a fair exit.

Enter Jardine Matheson. The prominent 19th-century British trading group is no longer the colossus that Jamsetji Tata, the founder of the Indian conglomerate, encountered as a 20-year-old in 1859. That’s when his father sent him to Hong Kong to learn the mechanics of the China trade.

Still, Jardine’s reach is vast — spanning Hong Kong’s premier Hongkong Land office towers and Mandarin Oriental hotels to Indonesian conglomerate PT Astra International and thousands of 7-Eleven and Dairy Farm storefronts. More importantly, the Keswick family, the Scottish dynasty behind the 194-year-old titan, can offer Bombay House some pointers from its own turbulent six-decade-long history in public markets.

Until a few years ago, Singapore-listed Jardine Matheson Holdings Ltd. held as much as 85% of Jardine Strategic Ltd., another holdco that had the same economic exposure as its ultimate parent. But JS also held nearly 59% of JM — a circular structure that made a hostile takeover of either entity effectively impossible without the other's consent. Yet because its shares were far less liquid and locked in a secondary holding vehicle, the public market penalized JS with a persistent discount to JM.

The SP Group’s predicament is similar. The Mistry family shares exposure to the same portfolio of assets as the Tata Trusts. But because Tata Sons’ shares are private, the SP Group suffers from an “illiquidity discount” in private credit markets — in the form of high interest rates whenever it pledges its holdings as collateral.

Jardine Matheson eventually realized that ignoring its minority discontent was unsustainable. So it executed a $5.5 billion buyout of Jardine Strategic in 2021 to simplify its capital structure. Although still substantial at 30% to 40%, the holdco discount has narrowed of late. More importantly for investors, despite the restructuring and the pandemic, the per-share dividend has grown steadily since 2020.

A similar maneuver should be on the radar of Tata Sons. For instance, it can raise debt to buy out SP Group’s stake. Applying Jardine’s holding-company discount should place the exit value between $20 billion and $30 billion. This will provide the SP Group with liquidity to pay down its high-cost loans. The Trusts won’t have to worry about a hefty block of holdco shares passing from the Mistry family to a corporate raider.

Then, to retire the acquisition debt, Tata Sons can complete its RBI-mandated public listing. By issuing new shares with differential voting rights during the IPO, the charitable trusts can remain firmly in charge of boardroom decisions. They can also safeguard the annual dividends they need for their philanthropic work.

Ultimately, the holdco discount is a bit of a bogeyman. The trustees’ unstated fear is that admitting public shareholders will pry open their absolute grip — anchored in supermajority voting rights, board nomination privileges, and veto powers in major strategic moves — over the sprawling conglomerate. Yet keeping Tata Sons private hardly guarantees stability. The infighting among the trustees over the past year has made that quite clear.

From trucks and steel girders to Titan watches, Taj hotels, and Trent’s Westside fashion storefronts, the group’s listed mainstays are present in practically every corner of India’s daily life. Globally, the group owns Jaguar Land Rover and consumer brands like Tetley Tea. Then there are the unlisted ventures. From semiconductor fabs and military-aircraft assembly in Gujarat to putting together iPhones and turning around Air India, Tata Sons is currently funding several capital-intensive bets from the group’s balance sheet.

The conglomerate’s rivals for projects of national importance — billionaires Mukesh Ambani, Gautam Adani, and Sajjan Jindal — all have their flagships firmly anchored in the public equity market. But Tata Sons’ financial health remains overly dependent on dividends from Tata Consultancy Services Ltd., India’s No. 1 code-writing business. With AI posing serious risks to the outsourcing firm’s future profitability, Tata Sons needs its own access to public equity markets.

Jardine’s continued holdco discount shows the price that Tata Sons will pay to simplify its capital structure. But just like at the older conglomerate, the benefits may outweigh the costs.