Considering that SP group has been struggling to service its debt and needs funds, the only option for them now is to sell their shares to Tata group. This could reduce Mistry firms shareholding in Tata Sons
MUMBAI: The Tata group on Tuesday informed the Supreme Court that they were willing to buy shares of Tata Sons held by the Shapoorji Pallonji (SP) group if the latter needs funds.
The SP group through its two investment firms -- Cyrus Investment and Sterling Investment -- holds an 18.4% stake in Tata Sons. The rest is held by the Tata group through Tata Trust and group companies.
On Tuesday, a Supreme Court bench comprising Justice SA Bobde, Justice AS Bopanna and Justice V. Ramasubramanian ordered a status quo for four weeks on any transfer or pledge of shares of Tata Sons or any further action on the pledge already created.
The matter will be heard next on 28 October
The order has effectively blocked SP group's ability to raise funds against these shares in the interim.
Considering that SP group has been struggling to service its debt and needs funds, the only option for them now is to sell their shares to Tata group. This could reduce Mistry firms shareholding in Tata Sons.
Cyrus Investment had been pledging shares to raise funds. The market value of their shareholding is pegged at ₹1.5 trillion.
The Tatas, taking an objection to this, had moved an urgent application in the Supreme Court on 5 September.
Tata Sons, represented by Harish Salve and Abhishek Manu Singhvi, had argued that any pledge will amount to transfer of shares and under the company’s Articles of Association (AoA), the board of Tata Sons has the first right to buy the shares at fair market value.
Senior Advocate CA Sundram, appearing for Mistry firms, argued that Tata Sons' move to block the pledging of shares has been causing havoc. “I am being blocked in everything," he said. "We have got 6500 employees and thousands of migrant labourers to look after."
“I have the right to buy their shares at market value. If they need money, we will buy it," said Salve.
Urging the apex court to stop the sale of shares, he added that Mistry firms were making ‘mischief’ by pledging these shares to third parties.
"SP group is clearly affected by the apex court’s order of status quo on its shareholding in Tata Sons. The option of monetizing (by pledge) without alienation of shares requires supreme court approval. Else, SP can sell some of its stake to the Tatas, at price and terms to be mutually agreed. Further, the Tatas may not offer to buy only a part of the stake and could look for total exit by the SP group as a condition to purchase shares," said Jeevanandham Rajagopal Partner, Fox Mandal, a law firm.
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