In three days, Tata Sons is going to hold its 99th Annual General Meeting. A slew of proposals, which may dilute the rights of the Shapoorji Pallonji group, have been sent to the shareholders for their approval: first, to change the company’s legal status from public to private; and second, to tweak the voting rights of the preferential shareholders, deepening further the ongoing feud after company’s patriarch Ratan Tata removed Cyrus Mistry as the group Chairman.
A private affair
On Friday, Tata Son’s spokesperson said that the company is seeking investors’ nod to make the public limited company to a private limited company, to which Cyrus Investments of the Pallonji group quickly objected and called it “yet another act of oppression of the minority shareholders of Tata Sons at the hands of the majority shareholders,” the Hindu reported.
The move would restrict Tata Sons’ shareholders such as Mistry’s Pallonji group, which holds 18.4 per cent equity shares in the company, from selling the shares to external investors. The Pallonji group is seeking to oppose the move at the AGM.
Tata Sons needs to clear a special resolution where at least 75 per cent votes are required to change its legal status. Besides a nod from its shareholders, the company would also need also need National Company Law Tribunal’s approval.
The controversy was yet to cool down when Tata Sons reportedly sent another proposal to its shareholders seeking their approval to give voting rights to preferential shareholders, if the holding company has not been able to pay dividends for a period of two years or more. According to legal experts, the move, if approved, will dilute the rights of the Pallonji group while strengthening the position of preferential shareholders.
Tata Trusts’ chairman Ratan Tata owns 10.5 lakh, Narotam Sekhsaria 5.7 lakh and NA Soonawala 2.6 lakh preference shares. The Pallonji group holds merely 20,000 preference shares, The Economic Times reported. Preference shares entitle its holders to a fixed dividend, whose payment takes priority over that of ordinary share dividends.
Changing 149-year-old legacy
In a separate development, Tata Group chairman N Chandrasekaran is reportedly considering winding down Tata Teleservices after failed attempts to sell the debt-ridden mobile services business. If it happens, Tata Teleservices, which has a consolidated debt of over Rs 34,000 crore, would become the first major Tata unit to be shut down in its 149-year-old history.
The Tata group is also in the middle of a plan to undertake a massive exercise to clean up the ownership structure of its group companies. According to the plan, Tata Sons will buy equity shares held by various group entities in one another through a complex web of cross-holdings.
The exercise would also result in some prominent listed companies, including Tata Steel, Tata Motors and Tata Chemicals receiving investments to the tune of Rs 6,000 crore, which those companies could use to pare debt to some extent.