Tatas may want to buy out Mistry’s stake, but where is the cash?

Rajesh Kurup Mumbai | Updated on March 27, 2021

The Tata group could potentially put an end to the troubles created by Cyrus Mistry and family by acquiring their stake, but it may find it difficult to fund the stake buy due to other commitments.

Litigation issues

Suhas Tuljapurkar, founder director of Legasis and managing partner of Legasis Partners said, “There have been several instances where a minority shareholder gets into protracted litigation causing continuous disturbance to the company.

“A minority shareholder can create nuisance, and therefore it makes sense to bring to an end matters that give rise to minority shareholders complaints from time to time. These can be brought to an end by majority shareholder buying the minority stake,” he added.

In its ruling, the apex court left it to the parties to take the Article 75 route or any other legally available route to settle the valuation issue.

The Companies (Compromises, Arrangements and Amalgamations) Rules, 2016 which were amended in February 2020, has some clear indication about the valuation of minority stake and how the majority can take over the minority.

‘Tough negotiation’

“Given the victory of the Tata Group, it will be a tough negotiation if at all a stake buy is pursued.

“Given that Tatas are also looking at infusing additional capital into its subsidiaries and growing its overall businesses, it is left to be seen if at all the Tatas will pursue the stake buy from the SP Group,” Rukshad Davar, Partner and Head (M&A Practice Group) at Majmudar & Partners said.

Published on March 26, 2021

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