Ratings agency S&P said on Tuesday that the potential listing of Tata Sons on the stock market and a change in Tata Group leadership are unlikely to have an immediate impact on the group companies’ credit ratings. However, in the long run this may lead to changes in group support and assessment of monetary policy. Any change in monetary policy is expected to be gradual given Tata Group’s long history and relatively conservative management approach, S&P Global Ratings said in a report. He said the listing of Tata Sons and the change in leadership will not affect the ratings of the existing group companies.

The rating of companies will increase

According to the report, the group’s rated companies operate under independent professional management, but Tata Sons influences their strategy. S&P currently rates group companies – Tata Steel, Tata Motors, Tata Motors Passenger Vehicles, Tata Power, Tata Power Renewable Energy, Tata Capital and Jaguar Land Rover. The rating agency considers all these companies strategically important to Tata Sons and expects the group’s support to boost their ratings by a maximum of three per cent. According to the report, changes in leadership, group structure or beneficiary priorities could raise questions about the sustainability of Tata’s strategy and financial policy in the long term and the feasibility of group support. This could be especially important for companies like Tata Steel, Tata Power and Tata Capital, which have big growth plans. At the same time, Jaguar Land Rover is in a period of business transformation.

What will be the effect of the listing?

S&P said that a general listing of Tata Sons in its current form would be neutral to the credit profile of the group companies. However, the advent of public shareholders may lead to greater oversight over investment decisions, capital allocation and support for weaker group companies. The agency said the impact of the listing would play out gradually as the size of the potential IPO would be large and it would take time for public shareholders to acquire a significant stake in the ownership structure. S&P said its current group support rating is based on the fact that Tata Sons has a dominant controlling entity and its strength comes from its stakes in a portfolio of companies spanning various sectors.