Mistry family proposes share swap to exit Tatas

The Shapoorji Pallonji (SP) group, the one largest shareholder in Tata Sons Ltd with an 18.4% stake, on Thursday proposed to swap its complete stake within the Tata group holding firm for shares in listed entities of India’s largest conglomerate.

The SP group, managed by the Mistry household, additionally demanded a pro-rata share of the Tata model worth (adjusted for internet debt) in money or in listed securities, in accordance with a scheme of separation filed within the Supreme Court on Thursday.

For the unlisted Tata group firms, the SP group has sought an impartial valuation adopted by fee in money or in listed securities.

“A selective reduction of capital by extinguishing shares of Tata Sons held by minority shareholders by swapping them with shares of listed companies (say Tata Consultancy Services) would be a simple solution of providing liquidity to Tata companies and fair compensation for the SP group,” stated the appliance filed within the court docket.

The transfer by Mistry group to hunt a cashless settlement marks a departure from its earlier stance of contemplating accepting staggered funds from Tata Sons over a time period.

The proposed association will assist scale back the potential of any extra debt on Tata group, the Mistry household stated.

Mint had reported on September 29 the Mistry household is predicted to share the main points of the provide within the Supreme Court, making it a part of the plea for reduction it’s searching for from the court docket in a minority shareholder oppression case. The subsequent listening to of the case is on November 3.

While Tata Sons didn’t instantly reply to requests for remark, an individual near the group stated the phrases provided might not be fully acceptable. “The management and the legal teams are currently examining the settlement application. But this is vastly different from the initial stated intent of complete separation from Tata group. This sort of arrangement would, in fact, give the Mistry family, which is the single largest shareholder in Tata Sons, more say in the listed companies by virtue of their shareholding,” stated this particular person, declining to be named.

“The most contentious issue in the Mistry offer is likely to be the proposed splitting of promoter stake in Tata Consultancy Services (TCS), which is the most valuable company in the Tata stable and enduring source of capital for Tata Sons,’’ said a second person, a former Tata Sons official.

On September 22, the Mistry family, which is fighting several court cases with the Tata group, said that a separation from the Tata group is necessary due to the potential impact this continuing litigation could have on livelihoods and the economy. For this, the family said it was crucial that an early resolution be reached to arrive at an equitable solution, reflecting the value of the underlying tangible and intangible assets.

The statement followed a protracted legal battle between the two groups, which started in December 2016, after Cyrus Mistry was ousted as chairman of Tata Sons in October that year. In December 2019, the National Company Law Appellate Tribunal ruled in favour of Mistry firms.

The final straw that pushed the Mistry firms to seek a separation came on September 5, when Tata Sons objected to the SP group’s move to pledge its stake in the Tata group holding company with lenders to meet its debt obligations.

According to analysts, a complete buyout of Mistry family’s stake would require Tata Sons to make an upfront cash payment to the tune of ₹1.75 trillion, which may add a significant debt burden on the Tata group.

“While the SP group’s structure reduces the cash burden for Tata Sons, swapping the shares with those of the listed companies only reverses what Tata Sons has been trying to accomplish over the past 24 months: to shore up equity and reduce cross-holdings in the operating subsidiaries. But having decided to part ways, it is up to both groups to work together to carve out a sensible exit in the interest of all stakeholders,” stated Hetal Dalal, chief working officer, Institutional Investor Advisory Services.