Tatas nix Mistry plan to resolve dispute, reject non-cash settlement offered by Shapoorji Pallonji group

Tata Sons on Thursday rejected the non-cash settlement offer extended by the Shapoorji Pallonji (SP) group in lieu of its 18.4% stake in the holding firm. The SP Group had offered a pro-rata division of all the assets of Tata Sons as part of the settlement and had valued its stake at Rs 1.75 lakh crore.

“It’s nonsense. This kind of relief cannot be granted. I am opposing it,” Tata Sons counsel Harish Salve told a Bench led by the Chief Justice. Salve added that if this proposal is accepted, it would leave Tata Sons with the problem of minority shareholding in all its group firms instead of the holding firm where this problem exists today. The CJI queried if the proposal is “tenable” at this stage.

In its filing before the SC on October 29, the SP Group has sought a direct stake in all the listed companies of the Tata Group, which includes a 13.22% stake in Tata Consultancy Service based on the the formula suggested by it. It had said that as per this scheme its stake in other listed firms of the group would be below 10%. It had also sought a pro-rata share of the Tata brand and asked for a neutral third-party valuation for the unlisted assets adjusted for net debt.

Earlier, on Tuesday during the course of the hearing, Salve had pegged the valuation of the Shapoorji Pallonji Group’s 18.4% stake anywhere between Rs 70,000-80,000 crore. On Thursday, Salve said the court can only ask Tatas to buy out the minority stake at fair market value and SP Group’s proposal is “akin to winding up Tata Sons”.

The SP Group’s proposal had said that as a non-cash settlement, it should get pro rata shares in listed entities of the Tata Group where Tata Sons currently owns stake. For example, 72% of TCS is owned by Tata Sons and SP Group’s ownership of 18.4% translates to 13.22% shareholding of TCS.

For the unlisted companies, an expedited valuation could be done with a valuer selected by both sides, the SP Group had proposed. The Tata brand was valued at $20 billion as per its last valuation.

During the hearing, the CJI told Salve that the SP Group’s resentment against Ratan Tata’s participation in the affairs of Tata Sons was genuine as he did not hold authority or powers. Salve said that this was done for the “smooth functioning” of the companies.

Meanwhile, the SP Group’s counsel, in his opening arguments, told the court that their claim of oppression of minority shareholders in Tata Sons cannot be overlooked just because of profits registered by the company over the years. The hearing will continue on Monday.