The next battle between Mistry and Tata will be on the valuation of SP Group's share in Tata Sons

Our Bureau Mumbai | Updated on March 26, 2021

BL25_01_RATMIS   -  BusinessLine


The dispute between Cyrus Mistry and the Tata group has come to an end with the Supreme Court upholding Tatas' decision to oust Mistry as Chairman of Tata Sons in 2016.

For many closely tracking the dispute, the court order comes as a relief. " If SC had upheld Mistry's position then there would have been great uncertainty for Tata group. If Mistry was reinstated, all actions taken by Tata group over the past years would have come under scrutiny. This order brings closure for all of us," says a senior executive close to the Tata group.

But the battle between the two sides is far from over. For the Mistry family, the next big challenge would be to get the right valuation for their shares in Tata group. Last year, the Mistry camp had made it clear that they want to separate from Tata Sons.

The Mistry side has pegged the value of its 18 per cent stake in Tata Sons at around Rs 1.75 lakh crore. But Tata Sons believe the value is in the range of Rs 70,000-80,000 crore. The Mistry family has also proposed to swap its entire holding in the Tata group holding company for equivalent shares in listed entities of Tata group and along with a pro-rata share of the Tata brand value payable by cash or listed securities. This has been rejected by the Tatas. The Supreme Court has not given a clear verdict on the valuation.

SP Group in financial crisis

This leaves the Mistry camp in a precarious position as the Shapporji Pallonji group is in a financial crisis. The SP Group has been in talks with banks to restructure its debt.

Shapoorji Pallonji Group (SP Group) is in the final stages of concluding its One Time Resolution (OTR) plan, which was invoked by its lenders on October 26, 2020, following the group’s inability to repay d-ebt.

In September last year, the SP Group had sought relief to restructure ₹10,900-crore of debt under the resolution framework for pandemic-related stress. The framework was approved by RBI based on the KV Kamath panel report, which allows financially stressed companies to recast their debt for two years.

The move came after Tata Sons had moved the Supreme Court on September 5, 2020, seeking to restrain SP Group from raising capital against the shares the latter held in the firm. The SP Group, which owns an 18.37 per cent stake in Tata Sons, was in the process of raising ₹11,000 crore, and had also signed agreements to raise ₹3,750 crore from Canadian asset manager Brookfield.

The SP Group had termed Tata’s move to block its fund-raising plans as violation of the Articles of Association (AoA), which only regulates the transfer of shares, and has no provision to restrict pledging or encumbrance of shares. The group also termed the move as “vindictive” and “intended to inflict irreparable damage on the SP Group”.

A clear verdict by the court on the valuation issue would have helped SP Group in securing lenders' confidence. " This is a setback for Mistry family as the issue of valuation of their stake in Tata Sons is going to be crucial for their financial stability ahead. The next legal battle will be on this issue," said an industry expert.

Published on March 26, 2021

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