Shapoorji Pallonji Group to Exit as Tata Offers to Buy Out Its Stake

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Shapoorji Pallonji Group to Exit as Tata Offers to Buy Out Its Stake
U.S. Embassy New Delhi / Public domain

In the Supreme Court on Tuesday, the Shapoorji Pallonji Group said that it would exit if it gets an “early resolution” and a “fair, equitable solution” from the Tata Sons. This legal battle between the two most prominent business groups marks a potential end to a 70- year old relationship.

The Shapoorji Pallonji Group is the highest minority shareholder with 18.37 per cent stake in Tata Sons, the holding company of Tata Group. It is said that a parting is due to the potential impact of the continuing litigation within the two sides on the economy and livelihood.

An early resolution is required to come at a reasonable and equitable solution delivering the value of the underlying tangible and intangible assets. The court has restrained the SP Group until October 28 from vouching or shifting its stake in Tata Sons and ordered the Mistrys to keep status quo the hearing starts.

The Tata Group said it is subject to acquiring shares held by the SP Group to support the latter’s fund-raising efforts; its lawyer informed the Supreme Court. The Tata Group had moved the court beginning this month to restrict the SP Group from raising capital against their shareholding in Tata Sons.

In its current application, Tata Sons solicited a route to the SP Group “to disclose on affidavit all the pledges, encumbrances or charges, direct or indirect, that may have been created” upon the shares of two Mistry family-run entities, Cyrus Investment Pvt Ltd and Sterling Investment Corporation.

Under the Articles of the Association (AoA), the board of Tata Sons declared it has a Right of First Refusal (RoFR) to purchase at fair value the shares of Mistry and others who desire to sell. Nevertheless, the SP Group needs the apex court to reject this petition as “creation of pledge does not amount to transfer of shares”.

As the urgent application by Tata Sons was filed shortly after the SP Group signified documents with a global investor to raise Rs 3,750 crore, the latter has blamed the former of blocking its Rs 11,000-crore fund-raising projects.

The SP Group said its role was “always one of guardianship to protect the best interests of the Tata Group”. “In 2012, when Cyrus Mistry accepted the position of Chairman of Tata Sons, it was not only with a sense of pride but also with a sense of duty as an ‘insider’ on the board of Tata Sons. The Tata Group was going through significant change,” it said.