Companies

Shapoorji Pallonji Group to part ways with Tata Sons

Rajesh Kurup Mumbai | Updated on September 23, 2020 Published on September 22, 2020

Move comes as SC bars Group from ‘further action’ on shares already pledged, till Oct 28

Signalling the end of a 70-year partnership with the Tatas, the Shapoorji Pallonji (SP) Group, which holds 18.37% stake in Tata Sons, on Tuesday said that “mutual co-existence of both groups at Tata Sons would be infeasible... and a separation from the Tata group is necessary”. This will mean the SP group selling its equity stake in Tata Sons. The move was triggered after the Supreme Court restricted the SP Group, till October 28, from pledging its shares in Tata Sons to raise debt.

“The current situation has forced the Mistry family to sit back and reflect on the past, present and possible future for all stakeholders. 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,” the SP Group said in a statement.

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The groups have been in a protracted legal battle since Cyrus Mistry was ousted as the Chairman of Tata Sons in 2016.

The Tatas, in turn, have accused Mistry of dragging a number of group companies into losses.

Read also: Tatas denies allegations, surprised to receive SP Group notice

Things appear to have come to a head over a move by the SP Group to pledge a part of its shares in Tata Sons to raise about ₹11,000 crore to meet its debt obligations. It had almost struck a deal with Canadian PE firm Brookfield to raise about ₹3,700 crore in July. But the Tatas blocked this deal by filing a plea in the Supreme Court.

 

Supreme Court decision

On Tuesday, a Bench of Chief Justice SA Bobde and Justices AS Bopanna and V Ramasubramanian directed the SP Group not to take any further action till October 28 on the shares already pledged. The fund-raise was important for the group, which is facing a liquidity crunch and failed to repay loans taken from its subsidiary, Sterling & Wilson.

“The Mistry family were in the midst of raising funds against the security of their personal assets. This move was undertaken to protect the livelihoods of its 60,000 employees and over 100,000 migrant workers. The action by Tata Sons to block this crucial fund-raise, without any heed for the collateral consequences, is the latest demonstration of their vindictive mindset,” the SP Group said.

“...a separation from the Tata Group is necessary due to the potential impact this continuing litigation could have on livelihoods and the economy,” it added.

According to Mistry's filing before the Supreme Court, the 18.37 per cent stake in Tata Sons is valued at about ₹1.79-lakh crore. Tata Sons has the first right of refusal and would push for a much lower valuation.

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Published on September 22, 2020
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