Divisions aside, Tata Trusts keen to keep Tata Sons private
However, Tata Trusts is still open to giving an exit to the SP Group over a mutually agreeable period, provided its own interests are maintained. Here's what explains Tata Trusts discomfort with a listed Tata Sons.
Tata Trusts remains committed to its decision to keep Tata Sons private, two Tata executives told Mint, hours after the Shapoorji Pallonji Group issued a public statement seeking a public share sale of the Tata Group holding company.
An initial public offering (IPO) will dilute Tata Trusts' shareholding, weaken its voting rights and limit its ability to influence key decisions at Tata Sons, the executives said on the condition of anonymity. Tata Trusts holds nearly 66% in Tata Sons, the holding company of the $300 billion Tata Group, India's largest conglomerate. Debt-ridden SP Group is the biggest individual shareholder, with 18.37% stake.
However, Tata Trusts is still open to giving an exit to the SP Group over a mutually agreeable period, provided its own interests are maintained, one of the two executives said. “We remain open to providing an orderly exit for the SP Group while safeguarding the Tata Group’s interests."
Article 75 of the Tata Sons Articles of Association gives Tata Trusts the right to buy out SP Group, a provision the latter agreed to when it obtained control of shares in Tata Sons in 1964, the executive said.
Tata Sons on 30 September crossed a central bank deadline for an IPO, seen by the SP Group as an opportunity to sell its shares and reduce its crushing debt. Currently, SP Group cannot sell its Tata Sons shares, constrained by the company's Articles of Association.
Despite reports that at least one trustee is in favour of a Tata Sons IPO to help the SP Group, this isn't the official stance of the Trusts yet, the two executives said. Mint could not ascertain if the said trustee discussed his view with others.
“There is no change of strategy," said the second executive, dismissing any softening in stance. The Trusts have already asked Tata Sons to work to stay private, and negotiate an exit for SP Group.
Tata Trusts is manned by seven trustees—chairman Noel Tata, TVS Motor Corp. chairman emeritus Venu Srinivasan; retired defence secretary Vijay Singh; Mumbai-based lawyer Darius Khambata; businessman Mehli Mistry; Citibank India former CEO Pramit Jhaveri; and Pune-based philanthropist and businessman Jehangir H.C. Jehangir.
The first executive questioned the rationale behind the SP Group's demand made after the Trust's meeting on Friday. He said the group's challenges are "self-inflicted", and that a Tata Sons IPO would not help overcome them.
Queries emailed to the Tata Trusts and SP Group remained unanswered.
“The issue here is that SP Group is demanding that Tata Sons go public so that it can get money to tide over its own debt problems. Now, if SP Group has given an undertaking to the Tatas that they have the right to buy its stake and if this has been upheld by the Supreme Court judgement in 2021 in the case of Cyrus Mistry Versus Tata Group, then what is the merit in making this demand?" said senior Supreme Court lawyer H.P. Ranina.
“Anyone can demand anything. Let them demand. Tatas should ignore it," said Ranina.
It is mandatory for publicly listed companies to secure the approval of a majority of minority shareholders to make key decisions. So, Tata Trusts won't have unfettered decision-making powers at Tata Sons if it is listed.
Sir Ratan Tata Trusts passed a resolution dated 28 July that the chairman of Tata Sons should not change its current status as an unlisted private company and that Tata Sons fully engage with the Reserve Bank of India in this regard, Mint reported earlier.
Sir Ratan Tata Trust and Sir Dorabji Tata Trust together own over 51% of Tata Sons, with additional stakes held by JRD Tata Trust, Tata Education Trust, Tata Social Welfare Trust, MK Tata Trust, and Sarvajanik Seva Trust. Shapoorji Pallonji Group owns 18.38%, nine Tata Group companies hold 12.86%, and seven individuals account for the remaining 2.87%.
On Friday, SP Group made a rare public statement asking for Tata Sons to go public. Aloo Mistry, sister of SP Group chairman Shapoor Mistry, is Tata Trusts chairman Noel Tata's wife.
“The public listing of Tata Sons is not merely a financial step — it is a moral and social imperative," read a statement from the SP Group. It would unlock significant value for over 12 million shareholders of listed Tata companies, who are indirect shareholders of Tata Sons, it said.
The statement invoked the Tata Group’s founder Jamsetji Tata, saying a listing would uphold the spirit of transparency envisioned by its founding father.
The statement also acknowledged the recent developments at Tata Trusts, where differences have surfaced among the trustees. “In light of the recent developments pertaining to the internal matters of Tata Trusts, it is both timely and necessary to reiterate our long-standing position," read a SP Group statement.
SP Group is insisting that Tata Sons go public as it could sell its stake and use the proceeds to pay back its creditors. Mint independently could not ascertain the debt of the SP group. However, in May, SP Group raised $3.3 billion (about Rs28,500 crore) from private creditors by issuing non-convertible debentures at an eye-watering interest rate of 19.75%. SP Group has 9.185% or half of its Tata stake, in addition to pledging shares in its privately-held real estate business as collateral as part of this transaction.
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