India: Shapoorji Pallonji group’s latest offer may not find favour with Tatas

Tata Sons chairman N. Chandrasekaran is weeding out businesses that are unprofitable or lack scale. Photo: PTI

The Shapoorji Pallonji (SP) group’s offer to swap its stake in Tata Sons Ltd for shares in publicly traded Tata group companies is unlikely to find support at Bombay House, the corporate headquarters of India’s largest conglomerate.

The offer in its current form may not be attractive to the group, a person close to the Tata group said, adding that the offer departs from the initial stated intent of the SP group to seek a complete separation from the Tata group.

Accepting the offer in the current form will risk giving the SP group more say in the listed Tata companies, which may not be in the interest of Tata Sons, he added.

While the offer to swap Tata Sons’ holdings for listed Tata stocks will not require the Tatas to raise huge sums of money, legal experts said that the offer might be a double-edged sword for the Tatas and a double bonanza for the SP group.

“Tata would have to allow the direct entity of the SP group in the listed entities as a significant minority shareholderand also cough up proportionate value for the brand value,” said Jeeva Rajagopal, partner, Fox and Mandal, a law firm.

“SP group, on the other hand, would get access to the potential for immediate liquidity and also directly mobilize other minority shareholders to join SP in vetoing critical decisions of the listed entities,” said Rajagopal.

Tata would, however, benefit from not having to liquidate assets to buy the SP stake in Tata Sons, he said, adding that the proposal will likely die a natural death by prolonged valuation discussions.

“That is, if at all Tata decides to play ball, even if only to appease the Supreme Court,” said Rajagopal.

The latest move by the Mistry group to seek cashless settlement marks a departure from an earlier stance where it was considering accepting staggered payments from Tata Sons over an extended period of time.

The arrangement will help reduce the possibility of any additional debt on Tata group, the Mistry family said in the application filed in the Supreme Court.

The offer will be part of the plea for relief the Mistry family is seeking from the court in a minority shareholder oppression case.

The next hearing of the case is scheduled for 3 November.

“This seems to be a clever move by the Mistry family, but this is just one of the proposals that will go in front of the mediators,” said Ramesh Vaidyanathan, managing partner, Advaya Legal.

However, he added that the presence of SP group firms on listed Tata companies is unlikely to impact these companies much.

“As a listed entity, these companies will have regulatory protection from Sebi (Securities and Exchange Board of India) and MCA (ministry of corporate affairs), so even a hostile shareholder in the Tata listed companies would not make their position worse,” said Vaidyanathan.

An email sent to Tata Sons did not elicit a response.

On 22 September, the Mistry family, which is fighting several court cases with Tata Group, said that a separation from the Tata Group is necessary due to the potential impact this continuing litigation could have on livelihoods and the economy.

The article was first published on livemint.com

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Singapore Reporter/s

In Singapore, we are looking to double our reporting team by this year-end to comprehensively cover the fast-moving world of funded startups and VC, PE & M&A deals. We want reporters who can tell our readers what is really happening in these sectors and why it matters to markets, companies and consumers. The ability to write precisely and urgently is crucial for these roles. Ideal candidates must have to ability to work in a collaborative, dynamic, and fast-changing environment. We want our new hires to be digitally savvy and ready to experiment with new forms of storytelling. Most importantly, we are looking for hard-hitting reporters who work well in a team. Collaboration and collegiality are a must.

Following vacancies can be applied for (only in Singapore).

Following vacancies can be applied for (only in Singapore).   

  • A reporter to track companies/startups that have raised private capital, and have the potential to become unicorns. SEA currently has over 40 companies with a valuation of over $100 million and under $1 billion.
  • A reporter who can get behind the scenes and reveal how funding rounds are put together, or why they’ve failed to materialise. She/he in this role will largely focus on long-format stories. 
  • A journalist to track special situations funds, distressed debt and private credit (from the PE angle) across Asia.