For SP group, relief may finally be in sight

For the SP Group, Tata Sons is its most valuable asset, but one that has so far been difficult to monetise because the holding company is privately held. A listing would turn at least part of that holding into a liquid asset, potentially allowing the group to sell shares over time, raise funds against them on better terms, or use the market value of the stake to negotiate cheaper refinancing.

This could be particularly important as the SP Group seeks to bring down its borrowing costs.

The group completed a Rs 21,500 crore refinancing in July at borrowing costs of around 18-19%, and is aiming to reduce these to about 12% through subsequent refinancing. It also faces repayments of around ₹3,500 crore by the end of September.

Lenders have been looking for tangible progress on monetisation of the Tata Sons stake before considering further refinancing or easing loan-to-value requirements, people aware of the discussions said.

A publicly traded Tata Sons could change that equation. Apart from creating a transparent market valuation for the SP Group’s holding, listed shares would be considerably easier to sell or pledge than shares in an unlisted holding company.

This could improve the SP Group’s ability to refinance existing borrowings and potentially lower the cost of future debt, an analysts said.

The possibility of a listing also comes after months of discussions between the two shareholder groups over ways to provide liquidity to the Mistry family without taking Tata Sons public.

Shapoorji Mistry had been in talks with Tata Sons chairman N Chandrasekaran and Tata Trusts chairman Noel Tata over monetising part of the SP Group’s stake until July. However, progress was limited by differences over the structure and valuation of a potential transaction.

Among the proposals discussed was one under which the SP Group could receive shares in a basket of listed Tata companies in exchange for a portion of its Tata Sons holding.

Another option under consideration has been a buyback of Tata Sons shares that would provide cash to the SP Group over a defined period while allowing Tata Sons to remain private. The valuation, funding, quantum and timing of any such transaction have yet to be finalised.

A listing could potentially remove the need for such a negotiated exit mechanism by creating a market through which the SP Group could gradually monetise its holding.

The implications, however, go beyond liquidity. As the largest minority shareholder in Tata Sons, the SP Group’s position could become more significant once the company is listed and becomes subject to the governance and shareholder approval requirements applicable to a public company.

In related-party transactions where Tata Trusts may not be permitted to vote, the SP Group’s holding could give it greater influence over shareholder decisions, according to legal experts.

At the same time, the Mistry family’s long history as a Tata Sons shareholder suggests that greater voting influence would not necessarily translate into opposition to the controlling shareholder. The SP Group has historically supported several decisions taken by the Tata Group.

A listing could also strengthen the case for the SP Group to seek representation on the Tata Sons board as its largest minority shareholder, legal experts said.

For the SP Group, however, the immediate benefit would be financial. A listed Tata Sons stake would give the debt-laden group something it has been seeking for years — a clearer route to unlock the value of its biggest asset without having to negotiate the terms of an exit solely with Tata Sons and Tata Trusts.