Cyrus Mistry (GettyImages)
Shapoorji Pallonji (SP) has once again run into financial troubles as some foreign lenders have asked the promoters of the group, the Mistry family, to furnish personal guarantees and additional shares of group companies as collateral against loans taken by pledging a part of its stake in Tata Sons Ltd, Mint reported citing two people aware of the matter.
Reportedly, the demand for guarantees was made after the Supreme Court order set aside the December 17, 2019, NCLAT order which allowed reinstatement of Mistry as Chairman of Tata Sons and as a director on the board and dismissed appeal by the SP group, which owns an 18.37 percent stake in the salt-to-steel conglomerate.
The apex court also said it cannot adjudicate on fair compensation for Shapoorji Pallonji Group for their holding in Tata Group companies.
“Some time last year, the promoter entities of Shapoorji Pallonji Group had borrowed close to $500 million from two foreign banks by pledging a part of the stake, before the Tata group moved the Supreme Court and obtained an injunction in the matter, which barred the Mistry family from pledging further stake," said one of the people cited above.
“A part of the money borrowed by the promoters is now up for repayment this year and, while the lenders are open to deferring the repayment, taking into account Shapoorji Pallonji Group’s current state of finances, they are insisting on additional guarantees."
The second person told the publication that the Mistry family maintain that since the Supreme Court did not rule against pledging of shares, the family is well within its rights to pledge more of its stake in Tata Sons to borrow funds adding that the lenders are now worried that the shares are "more illiquid than they were before the Supreme Court’s verdict, and recovery will be extremely difficult in the event of a default."
Moneycontrol could not independently verify the report.
Cyrus Mistry, the former chairman of Tata stated in a letter following the Supreme Court judgement that his conscience is clear. However, he said he is disappointed by the outcome of the judgement.
"Over the last four years, I have had the opportunity to reflect on my actions and on whether I could have handled the generational change in leadership better. In hindsight, while I may have had many imperfections, I have no doubt or erosion of conviction about the direction I chose, the integrity behind my actions and their consequences."