Divisions aside, Tata Trusts keen to keep Tata Sons private

The initial public offering (IPO) would dilute Tata Trusts’ shares, weaken its voting rights and limit its ability to influence key decisions at Tata Sons, executives said on condition of anonymity. Tata Trusts owns about 66% of Tata Sons, the holding company of the $300 billion Tata Group, India’s largest conglomerate. The debt-ridden SP Group is the largest individual shareholder with an 18.37% stake.

However, Tata Trusts is still open to granting exit permission to SP Group for a mutually acceptable period of time, provided its interests are protected, one of the two executives said. “We remain open to ensuring an orderly exit for the SP Group while protecting the interests of the Tata Group.”

Article 75 of the Articles of Association of Tata Sons gave Tata Trusts the right to acquire SP Group and the SP Group accepted this provision in 1964 when it took control of the shares of Tata Sons, the executive said.

Tata Sons beat the central bank’s deadline on September 30 for an IPO, which was seen by SP Group as an opportunity to sell its stake and reduce its crushing debt. Currently, SP Group cannot sell Tata Sons shares due to the company’s Articles of Association.

Two directors said that despite reports that at least one trustee was in favor of taking Tata Sons public to help the SP Group, this was not yet the Trusts’ official position. Mint was unable to determine whether the named trustee had discussed his view with others.

“There is no change in strategy,” the second executive said, rejecting any softening stance. The trusts have already asked Tata Sons to work towards confidentiality and negotiate an exit from SP Group.

Tata Trusts is managed by seven trustees: chairman Noel Tata, Venu Srinivasan, retired chairman of TVS Motor Corp.; retired defense minister Vijay Singh; Mumbai-based lawyer Darius Khambata; businessman Mehli Mistry; Pramit Jhaveri, former CEO of Citibank India; and Pune-based philanthropist and businessman Jehangir HC Jehangir.

The first executive questioned the logic behind the SP Group’s request following the Foundation’s meeting on Friday. He said the challenges faced by the group were “self-inflicted” and Tata Sons’ IPO would not help overcome them.

Emailed queries to Tata Trusts and SP Group remained unanswered.

“The problem here is that SP Group is demanding that Tata Sons go public so that it can get money to overcome its own debt problems. Now, if SP Group has given an undertaking to the Tatas that they have the right to buy their shares and this has been confirmed by the Supreme Court judgment in 2021 in the case of Cyrus Mistry Vs Tata Group, then what is the point of making this demand?” said senior Supreme Court lawyer H P Ranina.

“Anyone can demand anything. Let them demand. Tatas should ignore this,” Ranina said.

In order for public companies to make important decisions, they must obtain the approval of the majority of minority shareholders. This means Tata Trusts will not have unlimited decision-making power in Tata Sons if it is listed.

Sir Ratan Tata Trusts passed a resolution dated July 28, saying Tata Sons’ chairman should not change its existing status as an unlisted private company and ensured that Tata Sons fully engages with the Reserve Bank of India in this regard. Mint It was previously reported.

Sir Ratan Tata Trust and Sir Dorabji Tata Trust together own more than 51% of Tata Sons, with additional shares held by JRD Tata Trust, Tata Education Trust, Tata Social Welfare Trust, MK Tata Trust and Sarvajanik Seva Trust. Shapoorji Pallonji Group holds 18.38%, nine Tata Group companies own 12.86% and seven hold the remaining 2.87%.

On Friday, SP Group issued a rare press release calling for Tata Sons to go public. Aloo Mistry, sister of SP Group chairman Shapoor Mistry, is the wife of Tata Trusts chairman Noel Tata.

“Tata Sons’ IPO is not just a financial step but also a moral and social imperative,” SP Group said in a statement. The statement was included. This will unlock significant value for over 12 million shareholders of the listed Tata companies, who are indirect shareholders of Tata Sons, it said.

Referring to Tata Group founder Jamsetji Tata in the statement, he said the listing would uphold the spirit of transparency envisaged by the founding father.

The statement also acknowledged recent developments at Tata Trusts, where differences have emerged among trustees. “In light of recent developments regarding Tata Trusts’ internal affairs, it is both timely and necessary for us to reiterate our long-standing position,” SP Group said in a statement. The statement was included.

SP Group insists on Tata Sons going public as it can sell its shares and repay the proceeds to its creditors. Mint He was unable to independently identify the SP group’s debt. But in May, SP Group raised $3.3 billion (about Rs 28,500 billion) from private creditors by issuing non-convertible bonds at an eye-watering interest rate of 19.75%. SP Group owns 9.185%, or half, of Tata shares, in addition to pledging its shares in the private real estate business as collateral as part of this transaction.