The Shapoorji Pallonji Group, the largest minority shareholder in Tata Sons, the holding company of Tata Group, said on September 22 that a separation from India’s largest conglomerate would be required to protect the interest of all stakeholders. Here are five things you need to know about the latest development.
What exactly did the Shapoorji Pallonji Group announce on September 22?
The Shapoorji Pallonji (SP) Group, the biggest minority shareholder in Tata Sons, told the Supreme Court on September 22 that due to the impact of the ongoing litigation with the Tata’s "on livelihoods and the economy", it is necessary to exit and separate from the Tata group.
The SP group holds 18.37 percent stake in Tata Sons and believes the move is necessary to protect the interest of all stakeholders.
What lies at the heart of the litigation between both parties?
Both parties have been locked in several rounds of litigation at the National Company Law Tribunal and the Supreme Court since the shock dismissal of Cyrus Mistry, a handpicked successor to Ratan Tata, as Tata Sons chairman in October, 2016. The dismissal was linked to differences with Ratan Tata and the board of Tata Sons losing confidence in Mistry.
The Mistry family, the promoters of SP Group, alleged oppression of minority shareholders and lack of corporate governance following the sacking which rattled corporate India.
Ok, so what’s the latest leg at the Supreme Court all about?
The Tata group had moved the Supreme Court to restrict the SP Group from raising capital against their shareholding in Tata Sons and address debt obligations which were pegged at around Rs 30,000 crore in March 2019. The COVID-19 pandemic has put further pressure on the SP Group, which has significant interests in the real estate and construction segments.
This was reflected in the liquidity crisis that hit the group company Sterling and Wilson Solar which struggled with loan repayments.
The Supreme Court has ordered a status quo on the transfer or pledging of Tata Sons shares by the SP Group companies and will next hear the case on October 28.
Was there any delicious twist in the proceedings at the apex court?
Of course! This feud has seen many ups and downs and this time was no different. The Tata group indicated to the Supreme Court that it was open to buy out the stake held by the Mistry family, the promoters of the SP Group. The proposal has the potential to end the bitter dispute between both sides which has been fought in the courts as well as the public forum for the last four years.
Hmm, so what’s the value of the Mistry family stake in Tata Sons?Sources close to the SP Group peg the valuation of their 18.37 per cent stake at Rs 1,78,459 crore! This includes the value of the brand as well as the listed and unlisted entities. If struck, it would be the mother of all deals since the birth of India Inc! Now, the trillion dollar question is, will the Tatas agree to this valuation or will they play hardball?