&w=1024&resize=1024,0&ssl=1 "Noel Tata's new role may end the conflict with the Shapoorji Pallonji Group; Here's how to do it news")
The appointment of Noel Tata as the new chairman of Tata Trusts may ease long-standing tensions between Tata Sons and the Shapoorji Pallonji group. The development could also open the door for the latter to consider partial monetization of Tata Sons' 18.4% stake if mutually agreed terms can be reached.
However, a 2012 report stated Economic timesThere is no chance of such a move immediately as Noel Tata took over as chairman only after the death of industrialist Ratan Tata.
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“Limiting hostilities to the benefit of both sides”
“Tatas and Mistry (of the Shapoorji Pallonji Group) have had a shareholder relationship since 1965 due to ongoing disputes over the last nine years,” said a source quoted in the report. Noel Tata's appointment raises the prospect of renewed dialogue between the two sides, especially since his wife Alu is the sister of the late Cyrus Mistry, who was ousted as Tata Sons chairman in 2016, causing strained relations.
The source added: “While things may not be smooth sailing, reduced hostility could benefit both parties as shareholders by facilitating better communication.”
Debt reduction and asset monetization
According to Infomerics Ratings, 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. However, the group continues to face significant debt burden due to the increase in debt at promotional levels, aimed at refinancing loans taken out by its subsidiaries.
In the last two-three years, the group has successfully monetized assets such as Eureka Forbes, Sterling & Wilson Renewable Energy and SP Jammu Udhampur Highway. Further investments in assets are planned to reduce the group's total debt. It also has a Rs 8,500-crore IPO for its construction and engineering firm Afcons, with plans to sell shares worth around Rs 7,000 crore.
Prolonged disputes and potential sale of shares
Relations between Tata Sons and the Shapoorji Pallonji group have been strained since 2016 following the ouster of Cyrus Mistry. In 2020, SP Group sought to exit Tata Sons as part of its minority shareholder oppression case, offering to exchange its 18.4% stake for shares of Tata Sons' listed subsidiaries.
In an affidavit filed with the Supreme Court in December 2020, Shapoorji Pallonji Group valued its stake in Tata Sons at Rs 1.75 trillion, though Tata is worth Rs 70,000-80,000 crore. Currently, the value of Tata Sons' stake in listed companies has increased by 90 percent, reaching Rs 16.44 trillion from Rs 8.68 trillion in December 2020. As a result, SP Group's stake in Tata Sons is now valued at around Rs 3.02 trillion , compared to Rp 1.6 trillion in 2020 on a pro-rata basis.
Nevertheless, the share price is discounted due to the lack of regulation. At the recent annual general meeting, Tata Sons SP Group suggested listing the holding company on the stock exchange to unlock value and increase liquidity for all stakeholders. Any potential share sale of SP Group may involve various options such as buyback, private equity exposure 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 as much as 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 shares are owned by Cyrus Investments and Sterling Investments.
