The Tata group has decided to review the entire gamut of subsidiaries of group companies in the wake of the Tata Finance debacle. The Tata group has several hundreds of them. Ishaat Hussain, director (finance) of Tata Sons, the main holding company of the group, told Business Standard, "The general feeling is that there is a plethora of subsidiaries in the group and the non-operating subsidiaries.The existing subsidiaries of the group will be certainly reviewed."
Hussain added that the group companies would have to justify the existence of investment and non-operating subsidiaries if they were to continue. The investment activities of the subsidiaries are expected to be reviewed as well. "This could lead to a pruning of a number of group subsidiaries. In the current situation, the boards of subsidiaries take their own decisions. Personally, I am not in favour of subsidiaries," Hussain added.
However, it is not clear at this stage how the group will work around the cross-holdings problem. Several of the investment subsidiaries were set up over the years to make heavy investments in other Tata companies, not necessarily their respective parents.
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The Tatas have already begun the process of merging some of the investment subsidiaries with their parent. For example, Bambino Investments was merged with Tata Tea and Sabras Investments with Tata Chemicals.
The thinking in the Tata group is that fewer subsidiaries will eventually result in a leaner organisation which will help bring about greater transparency and accountability.
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