Tata Group, India’s largest conglomerate, said it is open to buying the stake of its largest minority shareholder, the billionaire Mistry family, as part of a proposal to help end a years-long legal dispute between the two parties.
A lawyer representing Tata Sons Pvt. Informed the Supreme Court on Tuesday of the offer to buy the 18% stake owned by the liquidity-strapped Shapoorji Pallonji Group if the latter needs to raise money to pay off overdue debt. . Instead, SP Group wants to borrow funds using the shares as collateral, a move Tata sees as potentially risky because the securities may end up falling into the hands of hostile investors.
The nation’s highest court on Tuesday barred the Mistry group from pledging or selling Tata shares until Oct. 28, when it begins hearing final arguments in the case.
The Shapoorji Pallonji Group, controlled by tycoon Pallonji Mistry and his family, owns about 18% of Tata Sons, the controlling company of the $ 113 billion Tata automotive software empire. Mistry’s son Cyrus has been embroiled in a bitter legal feud with Tata since he was ousted as Tata Sons chairman in a 2016 boardroom coup.
The Mistry empire, which includes real estate, infrastructure and appliances, was in preliminary discussions to borrow up to $ 1 billion by pledging a portion of its stake in Tata Sons to pay off past-due debt after asset sales stalled. amid the coronavirus pandemic, Bloomberg News reported in March, citing people familiar with the matter.
The SP Group had ₹Rs 9,280 crore ($ 1.3 billion) in external debt in its main holding vehicle, Shapoorji Pallonji and Company Pvt., At the end of February, according to Care Ratings Ltd. The local credit rating firm estimated that the debt of the entire group was more than ₹30 billion rupees as of March 2019.
The two conglomerates have been involved in protracted litigation over issues such as Mistry’s broader challenge to his removal as chairman of Tata Sons, a seat on the Tata Sons board, Tata Sons becoming a limited liability company and now on the share pledge proposal.
In 2016, in the immediate aftermath of Mistry’s removal as chairman of Tata Sons, the Tata family trusts approached sovereign wealth funds and other long-term investors to gauge their interest in purchasing the Mistry family stake if it were available, people familiar with said the matter then.
.