New Delhi: The Shapoorji Pallonji Group on Tuesday informed the Supreme Court that it would exit the Tata Group – an acrimonious development that, if carried out, will end an over 70-year-old relationship between some of India’s biggest corporate behemoths.
In a statement released on Tuesday evening, the Mistry family-led group, which owns a nearly 18.5% stake in holding firm Tata Sons through two investment companies, said that a separation was necessary due to the impact that “continuing litigation could have on livelihoods and the economy”.
“It is crucial that an early resolution be reached to arrive at a fair and equitable solution reflecting the value of the underlying tangible and intangible assets,” the statement by the SP group said.
“The SP-Tata relationship spanning over 70 years, was forged on mutual trust, good faith, and friendship. Today, it is with a heavy heart that the Mistry family believes that a separation of interests would best serve all stakeholder groups.”
The development is a culmination of a series of events that started four years ago, when the Tata Group surprisingly removed Cyrus Mistry as chairman of Tata Sons.
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More recently, the two parties have been locked in a legal tussle at the Supreme Court over a move made by Tata Son to restrain the Mistry family from raising capital against the shares it holds in the company.
Earlier on Tuesday, the Tata Group said it was open to buying out the stake held by the Mistry family as part of a proposal to end the legal dispute between the two entities.
A lawyer representing the salt-to-software conglomerate informed the Supreme Court that it would buy the 18% stake owned by the cash-strapped Shapoorji Pallonji Group if the latter needed to raise money for paying off its maturing debt.
As noted above, the SP Group currently wants to borrow funds using its shares in Tata Sons as collateral, a move that Tata is wary of because the stake may end up falling in the hands of hostile investors if the Mistry family is unable to repay the loans.
“As the largest minority shareholder owning an 18.37% stake, the role hitherto played by the SP Group, was always one of guardianship with an aim to protect the best interests of the Tata group. The SP Group had always used its voting rights as a shareholder for the best interest of the Tata Group,” the SP group’s statement noted.
“The Mistry family were in the midst of raising funds against the security of their personal assets to meet the crisis arising from the global pandemic. This move was undertaken to protect the livelihoods of its 60,000 employees and over 100,000 migrant workers. The action by Tata Sons to block this crucial fund raise, without any heed for the collateral consequences is the latest demonstration of their vindictive mind-set,” it added.
Consequently, the SP Group noted, the “past oppressive actions and latest vindictive move by Tata Sons’ leads to the “inexplicable conclusion” that mutual co-existence of both groups at Tata Sons would be infeasible.