&w=1024&resize=1024,0&ssl=1 "Noel Tata's new role could end conflict with Shapoorji Pallonji Group; See how the news")
The appointment of Noel Tata as the new chairman of Tata Trusts could ease long-standing tensions between Tata Sons and the Shapoorji Pallonji Group. The development could also open the door for the latter to explore partial monetization of Tata Sons' 18.4% stake, if mutually agreed terms can be reached.
However, a 2012 report said Economic TimesIt is likely that such a move will not happen immediately, as Noel Tata assumed the presidency only after the death of industrialist Ratan Tata.
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'Reduce hostilities to the benefit of both sides'
“The Tatas and Mistry (of the Shapoorji Pallonji Group) have had a shareholder relationship since 1965 due to disputes over the last nine years,” the report said citing a source. Noel Tata's appointment raises the prospect of a renewed dialogue between the two parties, especially as his wife, Alu, is the sister of the late Cyrus Mistry, who was removed as chairman of Tata Sons in 2016, causing strained relations.
The source added: “While things may not go completely smoothly, the reduced animosity could benefit both parties as shareholders by facilitating better communication.”
Debt reduction and asset monetization
The Shapoorji Pallonji Group is working to reduce its consolidated debt, reducing it from Rs 32,500 crore in March 2021 to Rs 20,564 crore in March 2023, according to Infomerics Ratings. However, the group still faces significant debt as borrowings have increased to promotional levels to refinance loans taken out by its subsidiaries.
Over the last two-three years, the group has successfully monetised assets such as Eureka Forbes, Sterling & Wilson Renewable Energy and SP Jammu Udhampur Highway. Further investment in assets is planned to reduce the group's overall debt burden. It also has a public offering of Rs 8,500 crore for its construction and engineering company, Afcons, with plans to sell around Rs 7,000 crore worth of shares.
Protracted disputes and possible share sales
Relations between Tata Sons and the Shapoorji Pallonji Group have been strained since 2016 following the dismissal of Cyrus Mistry. In 2020, the SP Group sought to exit Tata Sons as part of its minority shareholder oppression case, offering to exchange its 18.4 percent stake for shares in Tata Sons' listed subsidiaries.
In an affidavit filed with the Supreme Court in December 2020, the Shapoorji Pallonji Group valued its stake in Tata Sons at Rs 1.75 billion, although Tata is worth between Rs 70,000 and 80,000 crore. Now, the value of Tata Sons' shares in its listed companies has increased by 90 percent, rising to Rs 16.44 billion from Rs 8.68 trillion in December 2020. As a result, the SP Group's stake in Tata Sons It is currently valued at around 3.02 billion rupees, up from 1.6 billion rupees in 2020 on a pro rata basis.
Even so, the share price is discounted due to lack of regulation. At the recent annual general meeting of Tata Sons, the SP Group suggested listing the holding company to unlock value and increase liquidity for all stakeholders. Any potential sale of SP Group's stake could involve several options such as buyback, private equity involvement or transfer of shares to a listed company such as Tata Consultancy Services (TCS).
In March this year, investment bank Spark Capital valued Tata Sons at up to Rs 8 trillion, and SP Group's stake at Rs 1.46 trillion. To manage its debt, the Shapoorji Pallonji Group used its entire stake in Tata Sons to raise $2 billion from private credit funds. The stake is held by Cyrus Investments and Sterling Investments.
