Preliminary discussions between Tata Sons and its largest minority shareholder, the Shapoorji Pallonji (SP) Group, over a possible truce and an exit route for the latter are focused over the structure of the SP Group’s potential exit, multiple sources told Moneycontrol.
The talks, which began several months ago, are yet to reach any conclusion.
Two options are currently under consideration, the sources said. The first involves Tata Sons buying back the SP Group’s stake. This would require significant capital deployment and would trigger a capital gains tax liability of close to 36 percent for the SP Group — an option which it is reluctant to accept.
The second involves bringing in external buyers to acquire the SP Group’s holding. However, finding such investors has proven difficult without a clear exit pathway.
Regulations bar shareholders such as the Tata Trusts from holding equity in for-profit entities, as it would undermine their philanthropic objectives. The Trusts also want Tata Sons to remain unlisted, further narrowing the pool of potential buyers.
The sources confirmed that Tata Group Chairman N Chandrasekaran and SP Group head Shapoor Mistry did meet, though not very recently, but there has been little progress since.
Emails sent to Tata Sons and the SP Group remained unanswered till the time of publishing this article.
SP Group's debt woes
An exit from Tata Sons would go a long way in easing the SP Group’s financial pressures.
The group recently closed a $3.2-billion debt refinancing deal with a consortium of global alternative asset investors, according to people familiar with the matter.
A large portion of the loan was linked to the group’s promoter entity, Sterling Investments Pvt Ltd, which had in 2021 raised $2.6 billion from Ares Management and Farallon Capital with a tenor of three-and-a-half years. Sterling holds just over 9 percent in Tata Sons.
The refinancing was led by Davidson Kempner and Cerberus Capital, with partial financing from Farallon Capital and Ares, both of which rolled over part of their maturing debt.
The group was also in talks with Power Finance Corporation for refinancing at a lower rate but PFC’s Investment Committee didn’t clear the proposal.
With the refinancing completed, the SP Group has restructured the entire facility, which is expected to be repaid through the planned IPO of its real estate business, a process that is already underway.
The group also obtained consent from holders of its non-convertible debentures (NCDs) to remove restrictive covenants, enabling easier refinancing of loans taken against Tata Sons shares. Stock exchanges have granted in-principle approval for the changes.
Moneycontrol has reported that this consent was sought after SP Group entity Goswami Infratech repaid Rs 14,300 crore due on these NCDs through the Afcons Infrastructure IPO and the sale of its stake in the Gopalpur Port to the Adani Group.
The Tata–SP negotiations are unfolding against the backdrop of a Reserve Bank of India directive to Tata Sons to list itself. While market speculation suggests that the RBI may grant an exemption from the mandatory listing requirement, there has been no official confirmation.
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