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To settle the four-year-long legal tangle, the Shapoorji Pallonji Group has officially sought to separate from the Tata group by exchanging its stake in Tata Sons for shares in the Group’s listed companies such as Tata Consultancy Services.
To settle the disputes in the valuation of its 18.37 per cent stake in Tata Sons, the Tata Group holding company, the SP Group has proposed a pro rata split of both the listed assets and the Tata brand by a neutral third-party valuer.
The contours of the deal have to be approved by Tata Sons and the Supreme Court before it can be implemented. If agreed by all parties, this could signal the end of SP’s Group’s 70-year partnership with the Tatas.
“A selective reduction of capital by extinguishing shares of Tata Sons held by minority shareholders by swapping them for shares of listed companies (say TCS and others) would be a simple solution to provide liquidity to Tata companies and fair value compensation for SP Group,” the SP Group said in its filing before the Supreme Court on Thursday.
READ THE STORY: SP Group to file details of proposed settlement deal with Tata Sons before SC this week
“By proposing this remedy, SP Group seeks to propose a resolution that would take care of the best interests of both shareholders and stakeholders of Tata Sons. A separation of interests would equitably give the SP Group access to its proportionate share value in Tata Sons and would not let the two warring shareholders to have to live with each other only under a fiat of a court,” it said.
Also read: No formal proposal received from SP Group to part ways with us: Tata Sons
Valuation game
Valuing its stake in Tata Sons at more than ₹1.75-lakh crore, SP Group said that as non-cash settlement, it should be given pro rata shares in listed entity or entities of the Tata Group, where Tata Sons currently owns stakes.
For example, 72 per cent of TCS is owned by Tata Sons, and SP Group’s 18.37 per cent stake translates to 13.22 per cent shareholding in TCS (based on IT giant’s valuation of ₹1.35-lakh crore). The share price value of the listed assets is already known, while the brand valuation was already done by the Tata Group, said SP Group.
Also read: Group told to maintain ‘status quo’ on Tata Sons share pledge
READ THE STORY: ‘High valuation will be a major hurdle in SP Group’s bid to sell stake in Tata Sons’
Pro rata share of the brand value adjusted for net debt (debt less cash and cash equivalents) can be settled in cash or in listed securities. For the unlisted companies, the valuation can be done by a valuer approved by both sides, and the settlement can be done in cash and or in listed securities, it added.
Also read: Shapoorji Pallonji Group to part ways with Tata Sons
The apex court has tentatively set November 3 as the next hearing date.
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