September 22, 2020 marked the beginning to the end of 70-years-plus iconic association between two of our community’s and our nation’s most formidable business groups – Tata Sons and Shapoorji Pallonji Group. After four years of rough litigations, since Cyrus Mistry’s ouster in 2016, Shapoorji Pallonji (SP) Group confirmed its exit from Tata Sons as its minority shareholder, owning 18.37% stake.
Cyrus Mistry, heading the SP Group, was declared as Ratan Tata’s successor and the sixth Chairman of the Tata Group in 2011, after impressing Tata with his professionalism, expertise and humility. He formally assumed Chairmanship of Tata Sons in late 2012.
But trouble was brewing in paradise due to an alleged power-struggle between Ratan Tata (Tata Trusts) and Cyrus Mistry (Tata Sons), leading to the latter’s unceremonious ouster in 2016. A number of events displayed contradictions in business management and vision, as well as Tata’s discontentment, for eg., legal battles with NTT Docomo, failure in negotiations with Vodafone, or Mistry’s decision to sell off a few Indian Hotels’ overseas properties and pull the curtains on the UK Steel operations. Tata Trusts was also displeased as Mistry did not consider shareholders and the Group’s global ecosystem in these decisions.
On October 24th 2016, while Mistry’s ouster as Chairman of Tata Sons, by the Board, came as a shocking announcement to the outside world, internal sources claimed they were expecting this for a while, and that Mistry was even offered the option to put in his resignation, which he refuted. Ratan Tata was announced as Interim Chairman of the Group. By early 2017, Mistry was removed from the Tata Group Boards and N Chandrashekaran, the then TCS Chairman, was named Tata Sons Chairman.
Accusations and counter-accusations intensified post the exit, with Mistry accusing the Board’s Trustees of ‘shadow control’ and alleging legacy issues in the group, and Tata justifying the ouster, citing performance issues. A court brawl has been ongoing since December 2016, when two Mistry family-backed investment firms, ‘Cyrus Investments’ and ‘Sterling Investments’ moved the NCLT Mumbai alleging mismanagement and oppression of minority stakeholders by Tata Sons, further challenging Mistry’s removal by the company’s board. Tata Sons responded serving Mistry a legal notice alleging breach of confidentiality. NCLT rejected Mistry’s plea based on inadequate fulfilment of requisite criteria.
Mistry then moved the NCLAT, challenging NCLT’s order, during which time a proposal to turn Tata Sons into a private company was passed by its shareholders (August 2017). After much to-and-fro, with the NCLT and NCLAT, in December, 2019, Mistry was restored as Executive Chairman of Tata Sons, but the NCLAT suspended implementation for four months, giving time to the Tatas to file an appeal, which they did – challenging NCLAT’s order in the Supreme Court, which stayed the order. Mistry said he was not seeking to return as Tata Sons Chairman, but wanted to protect his rights as a minority shareholder.
This year, in July, Tata Sons filed that that the company’s financial performance and brand had diminished under Mistry’s leadership, to which Mistry retorted saying that Tata Sons had converted to a Private Co. in the midst of the NCLAT hearing in their affidavit to the apex court, which was gone under wicked circumstances.
A statement released by the SP Group on September 22nd, 2020, read, “The current situation has forced the Mistry family to sit back and reflect on the past, present and possible future for all stakeholders. The past oppressive actions, and the latest vindictive move by Tata Sons that impact the livelihoods of the wider SP Group community leads to the inexplicable conclusion that the mutual co-existence of both groups at Tata Sons would be infeasible.”
To raise capital, the SP Group has decided to sell its 18.37% stake in Tata, which it believes to be valued at around $20 billion or approximately ₹1.5 trillion, based on the value of the underlying operating companies, as well as the value of the Tata brand. The SP group will have to offer the stake to Tata Sons first based on the latter’s right of first refusal on the shares, as per the company’s Articles of Association (AoA). Tata Sons would now need to buy out the stake, thus putting a final end to the court battles and an enduring business partnership.
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