Tatas, SP explore phased stake deal; first tranche may raise Rs 25,000 cr

Valuation exercises involving Tata Sons’ unlisted businesses are underway as part of efforts to arrive at a value for the holding company. Any transaction involving the SP Group’s stake is likely to be structured in tranches aligned with its debt repayment requirements, with the first tranche potentially raising as much as Rs 25,000 crore, the source said, requesting anonymity.

The SP Group, the largest shareholder in Tata Sons after Tata Trusts, has sold several assets over the past five years to repay lenders. With a listing of Tata Sons remaining uncertain amid resistance within the Tata Group, the two sides are exploring alternative structures that could provide liquidity to the SP Group, whose debt is estimated at around Rs 60,000 crore.

Discussions over a potential buyback or other mechanism to provide an exit to the SP Group have gathered momentum after Tata Trusts, led by chairman Noel Tata, nudged Tata Sons chairman N Chandrasekaran to facilitate a resolution, according to a person familiar with the discussions. SP Group promoter Shapoor Mistry and Noel Tata are related, and both families are keen to resolve the long-running issue amicably, the person said.

Emails sent to the SP Group and Tata Sons seeking comments did not elicit a response.

The discussions come as the SP Group continues efforts to refinance expensive borrowings. On Monday, the group completed one of India’s largest private-credit transactions, raising about Rs 15,100 crore through rupee-denominated bonds. The proceeds will be used to refinance about Rs 15,500 crore of debt at Goswami Infratech, which issued three-year zero-coupon bonds priced to yield 18.95%, Bloomberg reported.

A transaction involving the Tata Sons stake would mark the most significant step yet in the SP Group’s multi-year asset-monetisation programme. In 2021, the group sold its controlling stake in Eureka Forbes to Advent International in a Rs 4,400-crore deal.

It subsequently pared its holding in Sterling and Wilson Renewable Energy through multiple stake sales. In late 2023, it sold Dharamtar Port to JSW Infrastructure for about Rs 250 crore, followed in 2024 by the sale of its controlling stake in Gopalpur Port to Adani Ports, generating equity proceeds of about Rs 850 crore. Later that year, the group monetised part of its holding in Afcons Infrastructure through its initial public offering, raising about Rs 5,750 crore through an offer for sale.

The search for an alternative liquidity mechanism has gained importance as the prospect of a Tata Sons listing remains uncertain as the Reserve Bank of India’s decision on the upper-layer non-banking financial company issue is still awaited.

The question of listing has also exposed differences within Tata Trusts, which collectively owns about 66% of Tata Sons. The debate has assumed wider significance because a public listing could alter the governance dynamics surrounding Tata Sons and impose the disclosure, shareholder-accountability and market-discipline requirements that come with being a listed company.

Against this backdrop, a negotiated mechanism to provide liquidity to the SP Group without listing Tata Sons could offer a way to address two long-standing issues simultaneously: the SP Group’s need to reduce leverage and the Tata Group’s preference to keep its holding company private.

Tata Sons stake in Tata group companies