Mumbai: Shares of several Tata Group companies fell on Friday as uncertainty grew over the future of Tata Sons, the Tata Group's holding company. The decline came a day after the Tata Sons board reappointed N. Chandrasekaran as chairman for another five years and began steps to comply with Reserve Bank of India regulations that could lead to a public listing of the company.

By 10:45 a.m. IST, the combined market value of listed Tata Group companies had fallen by about $3.2 billion, reversing part of the gains recorded on Thursday.

Tata Chemicals was among the biggest fallers, declining 8.37% by 10:45 a.m. IST. Tata Investment Corporation fell 3.67%, while Tata Motors Passenger Vehicles dropped 2.77%. Tata Consultancy Services declined 2.69%. Tata Power fell 0.56%, while Tata Motors declined 0.79%.

The falls followed a strong session on Thursday, when several Tata Group stocks rose after the Tata Sons board announced decisions on leadership and regulatory compliance.

Chandrasekaran had earlier informed the Tata Sons board that he would not seek another term after his current five year tenure ends on February 20, 2027. The board later asked him to reconsider, and he agreed to continue for another five years. The board approved his reappointment on September 17.

Noel N. Tata, chairman of Tata Trusts, opposed the decision. Tata Trusts, which holds about 66% of Tata Sons, has said that the resolution to reappoint Chandrasekaran is legally invalid. The Trusts argues that the Tata Sons articles require support from its nominee directors for such a decision.

The legal validity of the reappointment remains disputed.

The disagreement also concerns the future ownership and regulatory structure of Tata Sons.

On September 11, the Reserve Bank of India rejected Tata Sons' request to surrender its registration as a core investment company. Tata Sons is classified as an upper layer non banking financial company and is subject to the regulatory framework applicable to companies in that category.

Following the RBI decision, the Tata Sons board decided on September 17 to begin steps to comply with the applicable regulations. The board also said it would seek guidance from the RBI, Tata Trusts and other stakeholders on the compliance requirements.

The move could lead to a public listing of Tata Sons, although the company has not announced a final listing structure or timetable.

Tata Trusts has opposed a listing and has said that other options should also be examined. The Trusts has pointed to a Tata Sons board decision in March 2024 that the company should remain unlisted.

The Shapoorji Pallonji Group, which owns about 18.4% of Tata Sons and is its second largest shareholder, has taken a different position.

On September 17, Noel Tata placed before the Tata Sons board a proposal from the Shapoorji Pallonji Group to sell part of its Tata Sons shareholding. The proposal involves a two stage share buyout over 18 months that would yield at least Rs 25,000 crore.

The proposal is intended to provide liquidity to the Shapoorji Pallonji Group, but it has not been completed.

On Friday, Shapoor Mistry, chairman of the Shapoorji Pallonji Group, backed a possible public listing of Tata Sons and said the group looked forward to working towards a listing.

The differing positions of Tata Trusts and the Shapoorji Pallonji Group have therefore become an important part of the wider dispute over Tata Sons.

The issue extends beyond the future of Chandrasekaran. It also involves the relationship between Tata Sons and its shareholders, the company's regulatory status and the question of whether the holding company should remain privately held or move towards a public listing.

Tata Sons has interests across a wide range of businesses, while the wider Tata Group operates in sectors including information technology, automobiles, steel, power, chemicals and financial services.

For investors, the latest developments have created uncertainty over the leadership and future structure of Tata Sons. The fall in listed Tata Group stocks on Friday followed the initial positive market reaction to Thursday's board decisions.

The situation remains unresolved. Tata Sons has begun steps towards regulatory compliance, but the precise structure and timetable of any possible listing have not been settled. Tata Trusts continues to oppose a listing and disputes the validity of Chandrasekaran's reappointment, while the Shapoorji Pallonji Group supports a possible listing.

Further decisions by Tata Sons, Tata Trusts and the RBI will determine the next stage of the dispute.