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The change in stance comes at a critical juncture, as Tata Sons faces a September 30 deadline from the Reserve Bank of India (RBI), which has ordered the company to become a listed entity.
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In a high-level meeting held recently, Tata Trusts, which is one of the largest shareholders of Tata Sons, deliberated on key strategic issues concerning the Tata Group’s holding company. Two significant decisions were taken in the meeting. First, the trustees unanimously agreed that Tata Sons should continue to remain an unlisted private company, thereby resisting external pressures to go public. Second, the Trust directed Tata Sons Chairman N Chandrasekaran to initiate negotiations with minority shareholder Shapoorji Pallonji (SP) Group to facilitate a possible exit route for the conglomerate, which holds an 18.37% stake in the $180 billion Tata Group’s holding entity.
General A Shift in Tata Trusts’ Stance on SP Group Exit
This marks the first official instance where Tata Trusts has expressed willingness to consider an exit strategy for the SP Group. Previously, under the leadership of Ratan Tata, the Trust had rejected a proposal from the SP Group that suggested a proportional division of Tata Sons’ assets and liabilities based on its 18.37% shareholding.
The change in stance comes at a critical juncture, as Tata Sons faces a September 30 deadline from the Reserve Bank of India (RBI), which has ordered the company to become a listed entity.
General Tata Trusts Opposes Listing Despite RBI Pressure
While the RBI’s directive could potentially pave the way for the SP Group to liquidate its stake via public markets, Tata Trusts remains firmly opposed to listing. Over the last two years and ten months, Tata Sons has taken several steps to remain private—including repaying Rs 30,000 crore in loans, redeeming preference shares, and applying to shed its Core Investment Company (CIC) status. However, the RBI is yet to decide on the CIC reclassification.
General Dispute Over Valuation Methods
A sticking point in the negotiations has been the valuation of the SP Group’s stake. Tata Trusts have valued the shares based on book value, whereas the SP Group insists the valuation should reflect market pricing. Under current terms, Tata Sons holds the first right of refusal to buy back the SP Group’s shares.
General History of the Rift
Tensions between the two camps have been simmering since 2016, when Cyrus Mistry—representing the SP Group—was ousted as Chairman of Tata Sons. A prolonged legal battle ensued, culminating in a Supreme Court verdict that sided with Tata Sons and Tata Trusts.
The SP Group, currently saddled with high debt, has pledged its entire stake in Tata Sons to lenders. A structured exit from the group could provide the liquidity needed to repay its obligations.
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