Tata Taps Wealth Funds To Buy Out Shapoorji Stake

The Tata Group has reached out to several investors, including sovereign wealth funds, to raise funds to buy out the Mistry family’s stake in Tata Sons Ltd, with Chairman of Tata Sons, N. Chandrasekaran leading talks with potential investors, as per media reports (livemint.com). This would, once and for all, put an end to the ongoing feud between the Tata Group and its biggest minority shareholder – the Mistry family representing the Shapoorji Pallonji (SP) Group, which owns 18.4% stake in the Group, held through two investment firms, estimated to be ₹1.5 trillion, according to the valuations submitted to the Supreme Court.

The SP group is likely to broadly decide on the terms of the potential separation, including the final valuation and timelines before 28 October, 2020, when the Supreme Court hears the matter next. As per sources, both groups seek a quick resolution of court matters and the Mistry firms look to a quick exit and want a complete separation.

On 22nd September, 2020, the SP Group released a statement claiming they wished to sever its seven-decades-long relationship with the Tata Group, when the Supreme Court was hearing an application of Tata Sons, which sought to block Mistry firms from pledging Tata shares. It ordered a status quo on creating pledges on shares of Tata Sons. The cash-strapped Shapoorji Pallonji group was looking to pledge the shares to raise funds.

The two groups have been embroiled in a protracted legal battle since Cyrus Mistry, son of Shapoorji Pallonji group patriarch Pallonji Mistry, was ousted as Chairman of Tata Sons, in October, 2016. While the SP Group wants quick separation, Tata Group is facing a challenge because of the size and timing of the transaction, with senior officials of Tata Sons having gone overseas to figure out the needed funding, by reaching out to European sovereign wealth funds.

Under article 75 of the Tata Sons’ Articles of Association (AoA), the company has the right to acquire the shares before they are offered to any other potential buyers. The Mistry firms are yet to formally approach the Tata Group with an offer to sell. Both groups could look to appoint mediators for a smooth resolution.

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