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. The feud took a critical turn Wednesday, with Natarajan Chandrasekaran, the first Tata Sons chairman in the group’s history from outside the Tata and Mistry families, saying he will step down when his term ends in February.
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.
