Mumbai: The Reserve Bank of India's push for Tata Sons to list has handed its largest minority shareholder Shapoorji Pallonji Group a potential lifeline. The catch: it could take years to arrive.
For the debt-strapped SP Group, a listing could offer a way out—making its 18.37% stake more liquid and providing a market-based valuation that could help resolve a long-running dispute with the Tata Group over what the holding is actually worth.
The problem is timing. A Tata Sons listing, even if it goes ahead, could take several years, while the SP Group is facing near-term debt repayments and tight liquidity, according to experts. The RBI's decision could also reduce the urgency for the Tata Group to settle its differences with the SP Group, potentially pushing the negotiations down its list of priorities.
Further complications
That could further complicate the ongoing settlement talks, including a possible share swap under which the SP Group would receive shares in listed Tata Group companies in exchange for its stake in Tata Sons.
“The real story here isn't the listing mandate,” said Aurelia Menezes, partner at King Stubb & Kasiva, a corporate law firm. “What matters more for the SP Group is the settlement track running in parallel.” It would be strategically preferable for the SP Group to conclude its negotiations with the Tata Group over a potential share-swap deal, which are reportedly stuck over a disagreement on valuations, Menezes said.
“If that deal closes, SP Group exits the cap table entirely with liquid assets in hand, a materially better outcome than waiting for a listing whose valuation the two sides have never agreed on,” she said. She summarized the calculus for the group as “settle now for liquidity, or stay in for leverage that may take years to pay off.”
The SP Group did not respond to Mint’s requests for comment.
Twin push
Twice in the past year, SP Group chairman Shapoor Mistry has publicly pushed for a listing of Tata Sons. “As I have stated earlier, we would like to reiterate that a timely listing of Tata Sons is not merely a regulatory compliance but a necessary evolution. One that will reinforce corporate governance, deepen transparency and accountability,” Mistry said in April.
In contrast, Tata Trusts, which owns 65.9% of Tata Sons, in a resolution in July last year, directed the board of Tata Sons to do everything to keep it private and to look at ways to give an exit to its largest minority shareholder, the SP Group.
The Mumbai-based infrastructure and construction conglomerate faces an immediate debt repayment of ₹3,500 crore by the end of September, a deadline that has already been extended twice, according to media reports. Across the group’s promoter and operating entities, total debt is estimated at around ₹60,000 crore, according to multiple media reports.
The SP Group has not confirmed its overall outstanding debt.
The group refinanced the bulk of its debt in July by issuing three-year zero-coupon bonds worth ₹15,200 crore at a yield of 18.95%, according to Moneycontrol. The same month, it also issued dollar-denominated bonds worth $650 million at a yield of 14.5%.
The RBI ruling, however, could work in the SP Group's favor by widening its strategic options and strengthening its negotiating position.
“It now has multiple potential pathways: market-based monetization through a listing, a negotiated alternative settlement, or the option of retaining its strategic holding,'' said Monish G Chatrath, managing partner of corporate risk consulting firm MGC Global Risk Advisory. ``That optionality has an economic value of its own and potentially enhances its negotiating leverage.”
“Ultimately, this is less about who wins a particular round and more about who has the greater latitude to shape the endgame. The eventual outcome will turn on the structure, valuation and timing of whatever solution the group and its shareholders ultimately arrive at,” he said.
Strategic advantages
If Tata Sons lists on the bourses and the SP Group retains its shareholding, it could have key strategic advantages. The company’s significant minority shareholding could afford it a seat on the Tata Sons board, according to senior Supreme Court lawyer HP Ranina.
Even when voting on special shareholder resolutions pertaining to related-party transactions, where the Tata Trusts would not be eligible to vote, the SP Group’s shareholding would give it a deciding vote, he said.
Incidentally, Shapoor Mistry’s younger brother Cyrus was the former chairman of Tata Sons before being sacked by his predecessor Ratan Tata, leading to bad blood between the two storied business houses.
The group comprises listed company Afcons Infrastructure Ltd and several unlisted infrastructure and real estate firms. The SP Group also retains a small stake in listed Sterling and Wilson Renewable Energy Ltd after selling the bulk of its shareholding to Reliance Industries in 2022.
Over the years, the group has divested other assets to manage its debt. It sold its controlling stake in Gopalpur Port in Odisha to the Adani Group in 2024, its water purifier business Eureka Forbes to Advent in 2021, and several of its real estate assets. The group’s most valuable asset today is its stake in Tata Sons.