In your interest.
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No beating about the bush.
The Shapoorji Pallonji (SP) group headed by Cyrus Mistry, in an affidavit filed before the Supreme Court (SC), is seeking separation from Tata Sons Ltd. As non-cash settlement, the SP group proposal seeks shares in listed entities of Tata group on pro-rata basis and cash or listed securities for unlisted companies. The value of 18.37% stake of the SP group in Tata Sons is more than Rs1.75 lakh crore.
"Non-cash settlement will ease pressure on Tata to raise a large quantum of debt. It will minimise room for dispute on valuation, value of listed entities on last traded price, and value of brand as per the last valuation report. Tata Sons would continue to enjoy control over underlying assets. A similar scheme can be used to provide liquidity to Tata Group companies. This will be quicker to implement with minimal disruption to operating companies," the affidavthe SP Group in Tait filed by the SP group says.
According to SP group, Tata Sons is a core investment company and is the holding company for the Tata group; its value arises from its stake in listed equities, non-listed equities, the brand, cash balances and immovable assets. "Tata Sons is effectively a two-group company, with the Tata Group comprising Tata Trusts, Tata family members and Tata companies holding at around 81.6% of the equity share capital, and the Mistry family owning the balance 18.37%," the SP group says.
Explaining the scheme of separation, the SP group says, disputes over valuation can be eliminated by doing a pro-rata split of listed assets (since share price value is known) and pro-rata share of the brand (as brand valuation already done by Tata and published). A neutral third-party valuation can be done for the unlisted assets adjusted for net debt or debt less cash, it added.
It proposes, "As a non-cash settlement, SP group to be given pro-rata shares in listed entity(ies) of the Tata Group where Tata Sons currently owns stake. For example, 72% of Tata Consultancy Services Ltd (TCS) is owned by Tata Sons. SP Group's ownership of 18.37% translates to 13.22% shareholding of TCS, which is valued at about Rs1,35,000 crore at the present market capitalisation of TCS. Pro-rata shares of brand value adjusted for net debt or debt less cash and cash equivalents can be settled in cash and / or in listed securities. For the unlisted companies, an expedited valuation can be done with a valuer selected by both sides. This can be settled in cash and /or in listed securities."
According to SP group, the pro-rata separation of assets and liabilities would be a fair and equitable solution to all stakeholders.
"By proposing this remedy, the SP group seeks to propose a resolution that would take care for the best interest of both shareholders and all stakeholders of Tata Sons. A separation of interests would equitably give the SP group, as shareholders of Tata Sons, access to their proportionate share of value in Tata Sons and would not let two warring shareholders to have to live with each other only under fiat of a court," the affidavit filed by SP group says.
During the previous hearing, the Supreme Court had ordered a status quo for creating pledges or encumbrances by SP group on shares of Tata Sons.
Soon after the SC hearing, the SP group stated that it was time for them to separate from the Tata group.
In a release, the SP group had said, "The current situation has forced the Mistry family to sit back and reflect on the past, present and possible future for all stakeholders. The past oppressive actions, and the latest vindictive move by Tata Sons that impact the livelihoods of the wider SP group community leads to the inexplicable conclusion that the mutual co-existence of both groups at Tata Sons would be infeasible. The SP-Tata relationship spanning over 70 years, was forged on mutual trust, good faith, and friendship. Today, it is with a heavy heart that the Mistry family believes that a separation of interests would best serve all stakeholder groups."
In September 2020, Tata Sons had filed an urgent petition before the apex court requesting to restrain the SP group from raising capital by pledging their shares in the holding company.
Cyrus Mistry, a scion of the wealthy Shapoorji Pallonji family that owns stake in Tata Sons, has been locked in a legal battle with Tata Sons and Tata family head Ratan Tata after he was unceremoniously ousted as the chairman in October 2016 in a coup.
According to reports, Mr Tata and Mr Mistry had a fallout over key investment decisions. Mr Mistry had taken over as the chairman in 2012 after Mr Tata announced his retirement.