Tata Sons on Tuesday offered to buy out the 18.4% stake of Shapoorji Pallonji Group in the holding firm to help it raise funds to pay its debt. The offer by Tata Sons came during a hearing in the Supreme Court where the apex court barred the Mistry Group firms from pledging or selling its shares in the holding firm till October 28 when it starts hearing the final arguments in the case between the two parties.
On September 5, Tata Sons had moved the SC seeking to restrain the Mistry Group firms from raising funds by pledging its shares in the holding firm. The SP Group was planning to raise Rs 11,000 crore from various funds and had signed a deal with a marquee Canadian investor Brookfield Asset Management for Rs 3,750 crore in the first tranche against a portion of its 18.4% stake in Tata Sons. The share holding of the SP Group is valued around Rs 1 lakh crore according to rough estimates.
The Mistry Group had countered Tata Sons stating that it has every right to pledge its shares as the company’s articles of association do not restrict the creation of an encumbrance and only regulates transfer of ownership of shares to existing or new members.
In January, the SC, while staying the order of the National Company Law Appellate Tribunal (NCLAT) which had ordered reinstatement of Cyrus Mistry as chairman of Tata Sons, had offered a relief to the Mistry firms by stating that they cannot be forced to sell their stake under Article 75 of the Companies Act till the matter is not disposed off by the apex court. The Tatas had subsequently given an undertaking to this effect.
On Tuesday, senior advocate CA Sundaram, appearing for the SP group, said they were being stopped from pledging the shares which was creating havoc for the group. Tata Sons counsel, senior advocate Harish Salve said that the holding firm has a right to buy the shares at market price, but the SP Group was pledging them. “In the event of any default by the Mistry firms, the banks will place the pledged shares on the block for sale and if any third party offers to pay a premium, Tata Sons would have no choice but to match the higher price. Tomorrow, if Warren Buffett comes and tries to buy, we will have to pay 30% higher…”, Salve said while urging the court to restrain the pledging of shares by the SP Group.
“We are of the view tentatively that pledging is a limited transfer,” the bench observed while saying that it will conduct final hearing in four weeks.
Earlier, Tata Sons had told the SC that it was not a ‘two-group company’ and there was no ‘quasi-partnership’ between it and Cyrus Investments. Tata Sons had said this in an affidavit filed in the apex court while responding to the cross-appeal filed by Cyrus Investments seeking removal of alleged anomalies in the NCLAT order for getting representation on Tata Sons’ board in proportion to the stakes held by his family.