Options limited for Mistry to sell 18.4% stake

Mumbai | Updated on March 26, 2021

It is a tough call now for the Shapoorji Pallonji (SP) group, controlled by Cyrus Mistry family, to exit its 18.4 per cent stake in Tata Sons at a valuation quoted by it in the Supreme Court (SC).

SP group valued its stake at ₹1.78-lakh crore but experts say no major investor will risk any capital in a deal where they are not welcomed by Ratan Tata and an exit is not assured.

The first problem for Mistry family will be to get Tatas to agree on the value of the shares held by the SP group.

Against SP group’s valuation of ₹1.75-lakh crore of its stake, Tata Sons told SC in December 2020 that their holding can’t be worth more than ₹70,000-80,000 crore. “ There is a huge gap in the valuation pegged by the two sides. It will be difficult to bridge the gap, given that Tatas can now take time on the issue,” said an industry expert.

The second challenge for Mistry would be to find buyers for the shares in Tata Sons.

No proper exit route

“Tata Sons is an unlisted company and large players don’t invest without proper exit route. Since unlisted shares are not traded, their worth is far lower,” said SP Tulsian, founder, Premium Investments.

Tulsian says Tata Sons will surely list like all other groups, but the wait may be too long for the Mistry family. “It is likely that Tata Sons may not get listed during the lifetime of Ratan Tata or unless Mistry family exits first,” Tulsian said.

“Options for SP group are now limited and it is at the mercy of Tata Sons for stake sale.

Any third-party will not risk buying SP stake unless it is assured of an exit and good treatment by the majority shareholder,” said Sriram Subramanian, founder, InGovern, a proxy advisor.

Published on March 26, 2021

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