After seven decades-long association with the Tata Group, the Shapoorji Pallonji Group has submitted a plan of separation to the Supreme Court on the 29th of October.
The Shapoorji Pallonji Group has in that plan highlighted that the Tata Sons is, in reality, a “two-group company”. Tata sons consist of Tata Trusts, Tata family members, and Tata companies who hold 81.6 percent of the company, the other group consisting of the Mistry family members who have 18.37 percent holding in the company.
The Shapoorji Pallonji Group has demanded a non-cash settlement. The SP Group has asked for settlement in terms of shares and demanded shares in all listed Tata entities where Tata Sons owns a stake. As per a report from moneycontrol.com, the Mistry family-led group has asked for a separation on the basis of basis pro-rata split of listed assets (per known share price value) and a pro-rata split of the brand. (as per valuation done and published by Tatas)
As per the statement submitted by the SP Group, for the 72 percent ownership of the Tata Sons in Tata Consultancy Services (TCS), the 18.37 percent in Tata Sons would earn them a 13.22 percent stake in TCS, which is valued at ₹ 1,35,000 crore at present market capitalization.
SP Group’s plan added, “A neutral third-party valuation can be done for the unlisted assets adjusted for net debt. Pro-rata shares of brand value adjusted for net debt can be settled in cash and/ or in listed securities. For the unlisted companies, and 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 the Mistry family, they valued their holding in Tata Group to be at ₹ 1.75 crores. The Mistry family-led SP Group has been in a legal battle with the Tatas since Cyrus Mistry was removed from the post of Tata Group chairman back in 2016. Since then the companies have filed several complaints against each other.
According to a report from the Mint, the offer presented by the SP Group might not be an attractive proposition to the Tata Group. According to a close person who informed the Mint, the offer presented by the Mistry family-led company differs from their initial intent of complete separation from the Tata Group. Accepting this offer would mean a risk of providing SP Group with more in the listed Tata companies, which may not be the intent of Tata sons.
According to many legal experts, the offer presented, though will not require the Tata Sons to raise a huge sum of money, might be a double-edged sword, and might act as a more profitable deal for the SP Group.
Jeeva Rajagopal, partner, Fox, and Mandal, a law firm told Mint, “Tata would have to allow the direct entity of the SP group in the listed entities as a significant minority shareholder and also cough up proportionate value for the brand value.”
Rajagopal also added, “SP group, on the other hand, would get access to the potential for immediate liquidity and also directly mobilize other minority shareholders to join SP in vetoing critical decisions of the listed entities.”
The offer is presented as a plea of relief, which the Mistry family is seeking in a minority shareholder oppression case against the Tata Group. The next date of the hearing for the case is scheduled for November 3.
Ramesh Vaidyanathan, managing partner, Advaya Legal also commented on the offer. He said, “This seems to be a clever move by the Mistry family, but this is just one of the proposals that will go in front of the mediators.”