Tata Trusts chairman Noel Tata has met SP Group chairman Shapoor Pallonji Mistry and reportedly discussed ways to help the Mistrys unlock value from their 18.4% stake in Tata Sons and gain liquidity, as the cash-strapped SP Group grapples with high debt and leverage, according to a source familiar with the discussions.
One of the key suggestions discussed was for the Mistrys to swap part of their Tata Sons shares for shares of listed Tata group companies, the source said. The proposal could potentially involve Tata Power and Tata Steel, given the historical investments made by the Mistry family in these companies.
The deal could also involve a direct buyout of the SP Group’s stake by Tata Sons, financed by overseas banks, or a sale to an external investor.
The Mistrys’ stake in Tata Sons dates back more than a century. The family had invested Rs 1 crore each in Tata Power and Tata Steel in the 1910s and 1920s. A swap involving shares of these listed companies could provide the Mistrys with a more liquid asset and help address their immediate funding requirements.
The SP Group, the largest minority shareholder in the $290-billion Tata conglomerate, owns 18.4% of Tata Sons and is saddled with more than Rs 22,000 crore of high-cost debt. Another option under discussion is a direct buyout of the Mistry stake, either by Tata Sons or through a sale to a global investor, the source said.
Tata Sons is privately held, with 66.6% owned by 13 Tata Trusts. The Sir Dorabji Tata Trust owns close to 28%, while the Ratan Tata Trust holds around 24%. The SP Group owns 18.4%, while Tata Power, Tata Steel and Tata Chemicals together hold around 13%. The remaining stake is held by members of the Tata family.
The SP Group has been raising funds at high interest rates, with some borrowings carrying coupon rates of 18-20% from foreign funds and investors, including Cerberus Capital Management, Davidson Kempner Capital Management and Farallon Capital Management. The group has around Rs 3,500 crore of debt coming up for redemption or repayment by the middle of next month, according to the source.
Noel Tata’s role in discussions with Shapoor Mistry assumes greater significance following N Chandrasekaran’s decision earlier this month to step down as Tata Sons chairman at the end of his current term. Noel Tata, who is also Shapoor Mistry’s brother-in-law—Mistry’s sister Aloo Mistry is married to Noel Tata—would consequently play a more direct role in the group’s affairs.
