Tata Trusts Chairman Noel Tata on Thursday placed before the Tata Sons board a proposal from the Shapoorji Pallonji (SP) group to monetise a part of its 18% stake in the holding company for at least Rs 25,000 crore, according to a statement released on Thursday.
The proposal calls for the purchase of shares held by two Shapoorji Pallonji affiliates — Sterling Investments Corporation Private Limited and Cyrus Investments Private Limited — at a valuation determined in accordance with India’s Income Tax Rules, 1962.
The proposal follows discussions between Tata, Tata Sons Chairman N. Chandrasekaran and Shapoor Mistry, who leads the Shapoorji Pallonji Group. The SP Group holds an 18.37% stake in Tata Sons, making it the largest minority shareholder in the Tata Group holding company.
Under the proposed structure, the buyout would take place in two tranches over 18 months. Tata Sons would pursue a selective reduction of capital through the National Company Law Tribunal (NCLT), with the value of the shares determined in accordance with income-tax fair-value norms.
Tata told the board that the company could draw on several sources to fund the transaction, including internal cash flows, the sale of listed shares, bringing external investors into newer businesses, and public offerings of some Tata businesses.
Under the proposal, the board was asked to authorise Tata Sons’ management and representatives of Tata Trusts to initiate the NCLT process and continue negotiations with the Shapoorji Pallonji Group and its bankers, while reporting progress to the board.
The Trusts said the proposal reflects Tata Trusts’ continued efforts to reach “a fair and equitable solution” regarding the Shapoorji Pallonji Group’s holdings in Tata Sons.