Representatives of Noel Tata are considering a share exchange where the Shapoorji Pallonji group (SP Group) would receive shares in companies such as Tata Power Co. in exchange for part or all of its stake in the private company Tata Sons Pvt., which accounts for 18.4%.
According to sources close to the situation, the Tata group is negotiating with its largest minority shareholder on ways to unlock liquidity. This includes a potential exchange of shares in public entities of the Tata group, as SP Group requires funds to repay expensive debt obligations.
In addition to the share exchange, two other options have been proposed: direct acquisition of the construction giant's stake by Tata Sons, financed by foreign banks, or the sale of this stake to an external, preferably global, investor.
Any breakthrough in this long-running dispute between the Tata and SP Group families would be a significant advantage for lenders to SP Group, including funds such as Cerberus Capital Management LP, Davidson Kempner Capital Management, and Farallon Capital Management. For the Tata family, resolving the issue could reduce the scrutiny from regulators they have faced in recent years following renewed pressure from the central bank on their holding company for listing on stock exchanges.
Noel is the chairman of Tata Trusts, a charitable organization that owns 66% of Tata Sons shares. Natarajan Chandrasekaran's announcement of his resignation as Chairman of Tata Sons in February placed Noel in a position to advance a resolution. Furthermore, Noel has familial ties: he is married to Alu Mistri, the sister of SP Group Chairman Shapoor Mistri.
Representatives of Tata Sons and Shapoorji Pallonji Group did not provide immediate comments regarding these discussions. SP Group closed one of the largest private lending deals in India in July, as investors hope the conglomerate can monetize its stake in Tata Sons and release billions of rupees in liquidity.
Experts note that there is no guarantee that current negotiations will lead to a deal, and the transaction structure may change as negotiations progress. The Economic Times reported last month that a share exchange is a possible way for SP Group to monetize the value of its stake in Tata Sons.
A serious obstacle will be agreeing on the valuation for Tata Sons, which controls most of the vast conglomerate dealing in everything from salt to software, and has many large unlisted enterprises such as Air India Ltd. and the phone manufacturer Tata Electronics Pvt Ltd.
Both sides are assessing the legal aspects of all discussed options, as well as potential regulatory issues related to the share exchange, since it involves public Tata structures. SP Group also regularly informs its stakeholders about the progress of negotiations, while consultants study the legal implications of various considered structures.
A decision must be reached within the next 18 months, as this is the deadline for the first payment on SP Group's recently issued bonds. These bonds, sold through Eqyizen Investment Private, offered a rate of 18.95% with a maturity of 36 months, but according to bond documents reviewed by Bloomberg, the first interest payment is expected in July 2028.