Tata Sons and Shapoorji Pallonji chiefs meet to revive talks after nearly a decade
Tata Sons and Shapoorji Pallonji chiefs meet to revive talks after nearly a decade
The preliminary interaction could mean a long journey towards a settlement between the entities
Tata Sons chairman, N Chandrasekaran, and Shapoorji Pallonji (GP) Group chairman, Shapoor Mistry, are known to have met recently to resume discussions, which soured relations between the two following Cyrus Mistry’s ouster as Tata Sons chairman in 2016.
The talks could be a way forward to potential exit plans and monetisation for Tata Sons’ minority shareholder, SP Group, which has a stake in the company that's currently pledged with the lenders. The SP Group owns 18.37 percent of unlisted Tata Sons, the holding company of the Tata Group.
The elder of the two Mistry brothers, Shapoor, has always maintained a low profile. Meanwhile, Cyrus died in a car accident in 2022.
Recently, Tata Trusts passed a resolution affirming that Tata Sons should remain an unlisted private company and initiate discussions with the SP Group to provide it an exit, marking a key strategic shift.
The resolution read, "It was agreed at the meeting to request the chairman of Tata Sons to explore all possible avenues for ensuring there’s no change in the status of Tata Sons. This included a dialogue with the minority shareholder, the SP Group, for providing an exit to it from Tata Sons.”
While Chandrasekaran is leading parleys and will share updates with the Trusts, Tata Sons is expected to consider the rights and concerns of the SP Group as a minority shareholder.
Tata Trusts had earlier stated that the pledged Tata Sons shares were non-transferable.
Commenting on the matter, Ashish K Singh, managing partner of Capstone Legal, said, "It is in tune with the principles of corporate governance that a healthy relationship is maintained with minority shareholders of a company. Moreover, if channels of communication are open, it would ultimately help in smooth decision-making.”
In April, the SP Group had urged the Reserve Bank of India (RBI) to back a public listing of Tata Sons. It submitted that the move would benefit all stakeholders.
Struggling to service substantial debt, the SP Group expressed its concerns to Tata Sons over not being informed about the company's decision to surrender its registration as an Upper Layer Core Investment Company (ULCIC) to the financial regulator.
Early this year, the RBI stated in its annual report that it was considering Tata Sons’ application to deregister itself from being classified as a core investment company (CIC) under upper-layer non-banking finance company (NBFC-UL) norms.
Under the provisions, Tata Sons would have to get listed by September. It had become a zero-debt company to make itself eligible for exclusion from the list.
Meanwhile, the SP Group used its entire holding in Tata Sons as collateral to raise funding from private credit funds. The value of its stake in Tata Sons, based on its holdings in listed Tata Group companies, is Rs.3 lakh crore ($35 billion).
The SP Group, one of the country's oldest conglomerates, has, of late, faced financial stress due to high debt and liquidity crunch. With interests in construction, real estate, infrastructure and engineering, it faced financial strain, especially during the Covid-19 pandemic, which disrupted its business operations and cash flows across sectors.
To reduce the debt, the group has been selling its key assets. These include its majority stake in Eureka Forbes, the divestment of Sterling & Wilson Solar to Reliance Industries, the public listing of Afcons Infra, the sale of Gopalpur Port and the monetisation of real estate assets such as commercial projects and land banks.
