Should conglomerate holding companies be listed?

In the past few weeks, events at Tata Sons have unfolded at a frenetic pace, with uncharacteristically sharp differences surfacing, backroom tensions coming to light and regulatory decisions shifting over the past two years.

The latest is the Reserve Bank of India’s (RBI) rejection of an application by the Tata holding company to surrender its certificate of registration (CoR) as a core investment company (CIC), which is required to list per extant regulations.

This comes on the heels of N. Chandrasekaran’s announcement that he will leave the chairmanship of Tata Sons in February 2027. Shapoorji Pallonji Group, the largest minority shareholder in Tata Sons, is reported to be negotiating monetizing its 18.4% stake in the company with options including a purchase by Tata entities, sale to outside investors, or public listing.

With all this, the question of Tata Sons’ public listing has acquired a new urgency. The developments bring to focus distinct questions around control of the apex, liquidity for minority shareholders, and management of systemic risk. The temptation is to suggest public listing as the solution to all conundrums.

Private holdco vs listed holdco

A conglomerate holding company (holdco) is more than a collection of equity. Its function is to make strategic judgements across businesses with different capital cycles and risk profiles. They allocate patient capital, incubate businesses with long gestation periods, support temporarily weak enterprises, and absorb volatility across the group. Public listing changes that institutional setting by adding continuous market valuation and outside shareholders who favour distributions, divestitures, or simplification over reinvestment. While these are virtues of public markets, they are not always desirable at the apex of diversified industrial groups, particularly where investors can get public exposure through listed subsidiaries.

The distinction matters as operating businesses are generally easier to price. They have identifiable cash flows, sectoral peers, and measurable operating metrics. Holding company discounts can partly reflect investors’ preference to choose those exposures themselves rather than delegate it to an apex.

This is not necessarily irrational. Where major operating companies are already listed, a listed holdco adds a second layer of public-market pricing without necessarily improving an investor’s ability to select risk. An investor interested in automobiles may not want exposure to hospitality, insurance, or technology venture incubation merely because they sit within the same conglomerate structure. However, that very preference explains why listing the apex is often economically incoherent where subsidiaries are already publicly listed.

The listed operating companies beneath a privately held apex model create a more coherent architecture. Subsidiaries remain transparent, independently accountable, and market-disciplined. Investors can choose specific exposures according to their preferences. The holdco retains greater freedom to move capital across cycles, incubate new businesses and support strategically important ones. Private ownership also doesn’t mean opacity.

Private ownership of the apex is not incompatible with publicly listed subsidiaries. Japan expressly recognizes “parent-subsidiary listings”. Suntory Beverage and Food, for instance, a listed entity controlled by a private Suntory Holdings. The Tokyo Stock Exchange (TSE) does not require the apex to list; instead, it recognizes a structure in which the listed subsidiary remains sufficiently independent while minority shareholders are protected. TSE guidance consequently concentrates on governance, conflicts of interest, and disclosure surrounding the relationship between the parent and the listed subsidiary.

Germany provides us with another example. The Schaeffler family’s IHO structure is a strategic holding structure above major publicly traded industrial companies: IHO holds 79% of the voting rights in Schaeffler AG and substantial stakes in Continental and Aumovio. Under German law, a qualifying parent undertaking that exercises dominant influence over its subsidiaries must prepare consolidated financial statements and management reports. Their regulatory setup allows for group-level financial disclosures without requiring the apex to be publicly traded.

Indian regulations

India already addresses the two principal risks generated by this architecture through different bodies of law. Securities regulation, on one hand, attaches unusual significance to the “promoter” relationship, and regulates shareholding disclosures, related-party transactions, and other conflicts between the person exercising control and its listed entities. RBI, on the other hand, addresses financial interconnectedness and systemic risk. It specifically addresses companies whose principal business is holding investments in group companies through its CIC framework and makes access to “public funds” a central regulatory variable. Bank finance, debentures, commercial paper, and inter-corporate deposits, including funds raised indirectly, fall within RBI’s scope of “public funds”.

A systemically significant private apex could instead be required to disclose audited consolidated financial exposures, external and public borrowings, material inter-company loans, guarantees and security provided for group entities, contingent liabilities, related-party exposures, and its beneficial ownership and control structure. Prudentially sensitive information can be reported confidentially to the regulator. It would allow visibility into risk without forcing public trading.

SP Group’s current liquidity needs don’t materially strengthen the case for alisting. Private company equity is designed to be less liquid than publicly listed stock, and that doesn’t make it a regulatory defect. The possible options, like purchase by Tata entities, swap into Tata shares, or an outside investor, show that an exit can be structured without requiring listing.

Even the Supreme Court in 2021 left SP’s exit options to the legally available routes. Liquidity is therefore an exit and valuation problem and can’t become a justification for a total restructuring of Tata Sons.

Supervision of controlling Holdcos is possible without public listing. Regulatory instruments ought to match the risk they were meant to address. Conflicts between a controlling holdco and the public shareholders below it can be regulated at the level of the listed company. Group leverage and contagion can be addressed through consolidated supervision. Holdco liquidity can be addressed as a shareholder-exit problem. Listing the apex is an intrusive structural response. Size, opacity, systemic risk and liquidity are different problems. Public listing isn’t a universal remedy for them all.