Tata Trusts chairman Noel Tata on Thursday placed before the Tata Sons board a proposal from the Shapoorji Pallonji Group to monetise part of its shareholding in the holding company for a gross consideration of Rs 25,000 crore, according to a statement issued by the Trusts.
The proposal sees a share buyout in two tranches over 18 months through a selective capital reduction process before the National Company Law Tribunal (NCLT). The statement said this structure would be acceptable to the SP Group.
The shares are held through Sterling Investments Corporation Private Limited and Cyrus Investments Private Limited. The proposal followed meetings and discussions involving Noel Tata, Tata Sons chairman N Chandrasekaran and SP Group’s Shapoor Mistry.
Rs 25,000 crore proposal
“The transaction envisages a sale of such number of Tata Sons shares held by SICPL and CIPL as would, at a minimum valuation, as determined in accordance with Rule 11UA of the Income Tax Rules 1962, yield a gross consideration of Rs. 25,000 crores,” the statement said.
It added that the valuation would be based on the income-tax fair value of the shares. The statement did not disclose how many shares would be covered, the proportion of the SP Group’s holding that would be monetised or the valuation of Tata Sons implied by the proposal. It also did not announce board approval for the transaction.
The SP Group holds around 18.4% of Tata Sons, while Tata Trusts owns about 66%. The minority shareholder has favoured a listing to unlock value and improve liquidity.
Funding options outlined
Noel Tata suggested ways to raise the money for the proposed transaction. These included internal cashflows, selling listed shares, bringing investors into some of the group’s newer businesses and listing some businesses through an offer for sale, according to the statement.
He asked the board to initiate the NCLT process and authorise the operating teams of Tata Sons and Tata Trusts to continue discussions with the SP Group and bankers, and report back to the board.
“This is in continuation and reaffirmation of the Tata Trusts’ desire to offer a fair and equitable solution to the SP Group in respect of their holdings in Tata Sons,” the statement said.
The proposal comes amid differences over a listing of Tata Sons. In a separate statement on Thursday, Tata Trusts said it had not agreed to a listing and that the board would examine all available options following a communication from the Reserve Bank of India.
The Trusts said a separate board meeting would consider that assessment before deciding the next course of action. Noel Tata argued that listing the holding company would undermine the group’s charitable ownership model.
The liquidity proposal also coincides with a leadership dispute. The Tata Sons board approved another five-year term for Chandrasekaran despite Noel Tata’s opposition, while the Trusts challenged the resolution’s validity.
For the proposed stake monetisation, the next steps outlined in the statement are discussions with the SP Group and bankers and initiation of the NCLT process.