The Shapoorji Pallonji (SP) group said unexpectedly that it will end its seven-decade association with the Tata group, hinting that it is willing to part with its 18.4% stake in Tata Sons Ltd after the largest conglomerate India offered to buy it back from its largest minority shareholder as part of a plan to end the country’s largest corporate dispute.
The Shapoorji Pallonji group, led by billionaire construction mogul Pallonji Mistry, said Tuesday that it has concluded that the coexistence of the two groups at Tata Sons is unfeasible.
“The SP-Tata relationship that spans more than 70 years was forged on the basis of mutual trust, good faith and friendship. Today, the Mistry family believes with regret that a separation of interests would better serve all interest groups, “the SP group said in a statement.
“Past oppressive actions and the latest vengeful move by Tata Sons impacting the livelihoods of the broader SP group community lead to the inexplicable conclusion that the mutual coexistence of both groups at Tata Sons would be unfeasible.”
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The Shapoorji Pallonji group’s decision came shortly after the Tata group told the Supreme Court on Tuesday that it was ready to buy the Mistry family’s stake in Tata Sons at current market value.
This is the first time the Tata group has made its position public since the abrupt removal of Cyrus Mistry, Pallonji’s youngest son, as president of the Tata group holding company, sparking a bitter legal dispute.
The cash-strapped Shapoorji Pallonji group has been looking to raise funds by pledging its stake in Tata Sons, which is estimated in value. ₹1.5 trillion, to pay the debt, but the measure was blocked by the Tata group, which feared that the stake would fall into the hands of hostile investors who could threaten their control over the group’s companies.
The sale of a stake is likely to solve the current financial problems of the Shapoorji Pallonji group.
Chief advocate Harish Salve, representing the Tata group, told a Supreme Court court made up of Chief Justice SA Bobde, Justice AS Bopanna, and Justice V. Ramasubramanian that Tata Sons, majority owned by one group philanthropic trust fund, is willing to buy shares in the company to help the Shapoorji Pallonji group overcome its current liquidity crisis.
The Supreme Court was hearing a petition from Tata Sons, which challenged the Mistry family’s decision to compromise their participation to raise urgent funds to meet the upcoming payments.
In an interim relief for Tata Sons, the superior court on Tuesday ordered a status quo for four weeks on any transfer or pledge of shares or any further action on the pledge already created, listing the matter for the next hearing on October 28.
The interim ruling has effectively blocked the Shapoorji Pallonji group’s ability to immediately raise funds against these actions.
The Mistry family owns the Tata stake through its two investment firms: Cyrus Investments Pvt. Ltd and Sterling Investment Corp. Pvt. Limited.
September 17 mint had reported that the SP group had missed a deadline to repay the fees to the group company Sterling and Wilson Solar Ltd, raising questions about the group’s ability to repay its debt amid a faltering fundraising plan.
The Shapoorji Pallonji Group has been a passive investor in Tata Sons for decades.
Defending their right to pledge the shares, the Mistry family has argued that they will continue to retain ownership of the shares even after the shares are pledged, and their name will continue to be reflected as a member in the shareholder register.
However, the Tata group maintained that it has the right of first refusal on the shares since Tata Sons is a limited liability company, due to article 75 of the corporate bylaws, and given its character and constitutional documents, its shares cannot be transferred unless approved. by Tata Sons.
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