Tata Sons-Mistry Group Divorce: What’s The Case About? What Next?
A partnership of over seven decades is beginning to come to an end this September.
A partnership of over seven decades is beginning to come to an end this September, with the Shapoorji Pallonji (SP) Group, headed by the Mistry family, offering to exit from Tata Sons, on 22 September.
This preceded a long four-year court battle, which began with what is being referred to as the boardroom ousting of Cyrus Mistry, then the chairperson of the conglomerate.
WHAT IS THE LATEST CASE ABOUT
Earlier in September, Tata Sons moved the apex court seeking to restrain SP Group firms from raising capital against security of their shareholding in the company. The SP Group was looking to raise capital to cover its debt burden of over Rs 30,000 crore.
"A separation from the Tata Group is necessary due to the potential impact this continuing litigation could have on livelihoods and the economy," the SP Group said, in the SC.
When the Tata Group said that it was open to buy SP's shares in order to help the latter raise funds, the SC restrained the Group from either pledging or transferring the shares.
WHAT'S THE SP GROUP STAKE?
The Tata Group has offered to buy Mistry family's 18.37 percent stake in the company. The ties began more than 70 years ago, when Shapoorji Pallonji Mistry, Cyrus’s grandfather, bought a 12.5 percent stake in Tata Sons in 1936.
The next step is to initiate the buy back of shares. This is a long and complicated process, explains BloombergQuint's Menaka Doshi.
According to her, the following points will come to play when the process begins:
- It will be a court-driven process. While the court's interference in the modalities may not be much, its blessing would be sought before the case is withdrawn from the court
- Both sides would have to agree on valuation. Tata Sons is estimated to be valued at 10 lakh crore, while Mistry's stake is said to be valued at 1.75 to 2 lakh crore. They would have to appoint valuers and arrive at an agreed value
- Since large numbers are involved here, it is important for the two parties to arrive at a transaction structure. This entails how Tata Sons are going to raise money to arrive at the transaction.
WHEN IS THE SEPARATION LIKELY TO BE FINALISED?
According to media reports, the entire process is likely to be long and complicated and it could take months before the partnership ends.
(With inputs from BloombergQuint)
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