On Thursday, the Shapoorji Pallonji Group said it had submitted to the Supreme Court a plan to terminate its seven-decade-old association with the Tata Group. The Mistrys priced their holding in the Tatas at Rs 1.75 lakh crore, informing the apex court, which is hearing the long-drawn legal fight between the two parties that began after the Tatas sacked Cyrus Mistry as the Chairman in a boardroom coup on October 28, 2016.
“The Shapoorji Pallonji Group claimed in a statement quoting from its submission to the apex court,” Tata Sons is essentially a two-group corporation, with the Tata Group comprising Tata Trusts, Tata family members and Tata companies holding 81.6% of the equity share capital, and the Mistry family owning the balance 18.37%.
The party has submitted to the Supreme Court a proposal to split the Tatas.
Tata Sons are the core investment firm and are the Tata Group’s holding company and are valued as a result of its position in listed equities, non-listed equities, brands, cash balances, and immovable assets. It said the value of the SP Group’s 18.37 percent stake in Tata Sons is over Rs 1,75,000 crore.
The SP Group claimed that conflicts overvaluation can be eliminated in its separation scheme by making a pro-rata split of the listed assets (share price value is known) and pro-rata brand share (brand valuation already carried out and released by Tata). For unlisted properties, adjusted for net debt, a neutral third-party assessment may be carried out.
According to the SP group, the share swap solution would reduce conflicts overvaluation, will be easier to execute, would relieve pressure on Tatas to raise significant amounts of debt, will help Tata companies and ensure that they do not end up losing control over group businesses.
The SP Group sought pro-rata shares in listed Tata companies, where Tata Sons currently holds a stake, as a non-cash settlement.
For example, although Tatas own 72 percent of TCS NSE 0.40 percent, the SP Group’s 18.37 percent ownership of Tata Sons translates to 13.22 percent of TCS’s shareholding, which, according to the statement, is worth Rs 1,35,000 crore at present market capitalization.
The statement said that the pro-rata share of brand value adjusted for net debt can be settled in cash and/or in listed securities.
With a value chosen by both sides, an expedited valuation can be carried out for the unlisted firms. This may be settled, it added, in cash and/or in listed securities.
