The Shapoorji Pallonji (SP) group unexpectedly said it will end its seven decades-long partnership with the Tata group, hinting that it is willing to part with its 18.4% stake in Tata Sons Ltd after India’s biggest conglomerate offered to buy it back from its largest minority shareholder as part of a plan to end the country’s biggest corporate feud.
The Shapoorji Pallonji group, led by billionaire construction tycoon Pallonji Mistry, said on Tuesday that it has concluded that the co-existence of both groups in Tata Sons is 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,” the SP group said in a statement.
“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.”
View Full Image
The Shapoorji Pallonji group’s decision came soon after the Tata group on Tuesday told the Supreme Court that it was ready to buy the Mistry family’s stake in Tata Sons at the current market value.
This is the first time the Tata group has made its stance public since the abrupt ouster of Cyrus Mistry, the younger son of Pallonji, as chairman of the Tata group holding company, triggering a bitter legal feud.
The cash-strapped Shapoorji Pallonji group has been looking to raise funds by pledging its stake in Tata Sons, estimated to be worth ₹1.5 trillion, to pay down debt but the move was blocked by the Tata group, which feared that the stake may fall into the hands of hostile investors who could threaten its control over group companies.
A stake sale is likely to solve the Shapoorji Pallonji group’s current financial problems.
Senior advocate Harish Salve, representing the Tata group, told a Supreme Court bench comprising Chief Justice S.A. Bobde, Justice A.S. Bopanna and Justice V. Ramasubramanian that Tata Sons, majority-owned by a clutch of philanthropic trusts, is willing to buy the Mistry family’s stake in the company to help the Shapoorji Pallonji group tide over its current liquidity crisis.
The Supreme Court was hearing a Tata Sons petition, which challenged the Mistry family’s decision to pledge its stake to raise urgent funds to meet upcoming repayments.
In an interim relief to Tata Sons, the top court on Tuesday ordered a status quo for four weeks on any transfer or pledge of shares or any further action on the pledge already created, listing the matter for next hearing on 28 October.
The interim ruling has effectively blocked the Shapoorji Pallonji group’s ability to immediately raise funds against these shares.
The Mistry family owns the Tata stake through its two investment firms—Cyrus Investments Pvt. Ltd and Sterling Investment Corp. Pvt. Ltd.
On 17 September, Mint had reported that the SP group had missed a deadline to repay dues to group company Sterling and Wilson Solar Ltd, raising doubts about the group’s ability to service its debt amid a faltering fundraising plan.
The Shapoorji Pallonji group has for decades remained a passive investor in Tata Sons.
Defending its right to pledge the shares, the Mistry family has argued that it will continue to retain the ownership of shares even after shares are pledged, and its name will continue to be reflected as a member in the register of shareholders.
However, the Tata group contended that it has the right of first refusal on the shares since Tata Sons is a private limited company, due to article 75 of articles of association, and given its character and constitutional documents, its shares cannot be transferred unless approved by Tata Sons.
