The ongoing battle in the Tata group once again highlights the way Indian companies are controlled—through a complex network of holding firms, investment companies, subsidiaries and intergroup investments. Tata Sons has major stakes in the operating companies of the group. There is another layer as one operating company controls another; for example, the way Tata Global Beverages controls Tata Coffee. Then there are interlocking financial investments by one group company in another.
The battle between the Ambani brothers was another case in point. Thus, promoter groups have more management leverage in individual companies than their legal cash flow rights would entail. Complicated holding structures are not unknown in other parts of the world. But the problem is particularly acute in India—for both historical and tax reasons. As a result, some of the newer online firms have chosen to locate their holding companies offshore in Singapore. This is a corporate governance problem that should worry more investors.