Tata-Mistry case: SP Group debt recast might face hurdle, valuation a thorny difficulty

The Supreme Court’s judgment on Friday upholding the removing of Cyrus Pallonji Mistry as the chief chairman of Tata Sons and subsequently as director in Tata firms is prone to stymie the Shapoorji Pallonji Group’s plan to chop debt, stated consultants.
Apart from utterly overturning the National Company Law Appellate Tribunal’s (NCLAT) ruling on reinstatement of Mistry, the apex court docket stated it could not go into the query of deciding a “fair value compensation” for the SP Group in order that it may exit the Tata Group.
“The Tatas and Mistry will have to do proper valuation of Mistry’s 18.37 per cent stake in Tata Sons. They can bring in a professional, independent valuation firm or valuer,” stated a high monetary sector chief who has been monitoring the Tata and SP teams for a number of years.
The SP Group’s flagship firm, Shapoorji Pallonji Corporation Private Limited, has debt reimbursement obligations of near Rs 5,400 crore in 2020-21, whereas the SP group consolidated borrowings are in extra of Rs 25,000 crore.
In September final yr, the SP Group had instructed the apex court docket that it was able to exit from Tata Sons, supplied it will get an “early resolution” and a “fair, equitable solution”, and valued its stake at Rs 1.75 lakh crore. On the opposite hand, the Tata Group had valued the Mistry household shares in Tata Sons between Rs 70,000 and Rs 80,000 crore. Bankers, authorized consultants and monetary sector leaders really feel that each the perimeters must work out an appropriate exit plan for Mistry they usually might must get an unbiased valuer who’s agreeable to each the perimeters to succeed in to an amicable answer particularly on the valuation of SP Groups 18.37 per cent holding in Tata Sons.
Tata Sons, an unlisted firm, holds important stake in most Tata group firms and is, in flip, held majorly by two trusts, the Sir Ratan Tata Trust and the Sir Dorabji Tata Trust.
“The valuation of these Tata companies, which are listed on the stock exchanges, may have to be considered. However, with the SC ruling coming in favour of the Tatas, they have got an upper hand… but the Tatas will have to go for some give and take to arrive at a settlement,” the monetary sector chief stated.
Source near the Tata Group, nonetheless, stated it was now as much as the SP Group to resolve whether or not they needed to stick with their holding in Tata Sons or promote it to the Tata Group on the valuation that the group arrived at earlier based mostly on numerous parameters.
“They can’t go to the court for valuation as it is a matter between the buyer and seller. Also, Tatas are not telling Mistry’s to sell their holding, it is they who want to sell, so they have to take the call,” stated the supply.
Though the SP Group had claimed the worth of its stake in Tata Sons at Rs 1.75 lakh crore, it later claimed a valuation of Rs 1.5 lakh crore. The SP Group, in a cross-appeal later filed, stated that they need to be given 18 per cent in all downstream Tata firms.
Even if each the events agreed to a valuation and Tatas resolve to purchase the stake held with SP Group, banking sources say Tata Group must discover sufficient funds to purchase out the Mistry’s 18.37 per cent stake.
“Who will buy Mistry’s stake? Do Tata Trusts have enough funds to buy out Mistry stake? The Tatas will have to find a way out to buy the stake of Mistry. One way could be that the Tatas float a holding company to buy the Mistry’s stake,” he stated.
In the occasion that each the events fail to reach at an amicable answer, the Mistrys would go for one other spherical of litigation to get a good worth of their stake in Tata Sons,
A P Singh, accomplice at legislation agency M V Kini stated.
“The next round of litigation will be limited to aspect of valuation (of SP Group stake). There are various procedures for deriving a fair market value, and there are established procedures. They might come to a common understanding and reconciliation. If not, there will be another lengthy litigation,” Singh stated.