Nawal Tata, Chairman of Tata Trusts, which holds about 66 percent of Tata Sons shares, presented a proposal from Shapoorji Pallonji Group (SP Group) at the Tata Sons board meeting. Under this plan, SP Group will sell its Tata Sons shares held through Sterling Investment Corporation (SICPL) and Cyrus Investments (CIPL) to raise at least ₹25,000 crore.
The minimum value of these shares will be determined according to Rule 11UA of the Income Tax Act, 1962. The objective of this proposal is to find a way to meet SP Group's liquidity needs without requiring a public listing of Tata Sons, which is the holding company of the Tata group.
It was emphasized in the statement that this is a continuation and confirmation of Tata Trusts' desire to offer SP Group a fair and equitable solution regarding their stakes in Tata Sons. The promoters' family of SP Group owns 18.37 percent of Tata Sons shares through Cyrus Investments and Sterling Investment Corporation.
The group aims to monetize its stake in Tata Sons to repay debt raised through high-yield bonds by various subsidiaries of the group.
The statement by Tata Trusts on Thursday also mentioned that this proposal was part of earlier meetings and discussions between Nawal Tata, N Chandrasekaran, Chairman of Tata Sons, and Shapoorji Mistry, Managing Director of Shapoorji Pallonji & Company.
Furthermore, it was noted that SP Group is willing to consider a structure where the proposed share buyback would be executed in two tranches over 18 months. As part of this proposal, Tata Sons will initiate the process of selective capital reduction through the National Company Law Tribunal (NCLT), with the Tata Sons shares being valued based on their fair value according to tax regulations.
Nawal Tata also suggested that Tata Sons could explore various ways to finance the proposed buyback, including internal cash flows, sale of issued shares, attracting investors in some of its new ventures, and raising funds through offerings of stakes in certain businesses. He instructed the board to commence the process in the NCLT and authorized the operational teams of Tata Sons and Tata Trusts to continue negotiations with SP Group and its bankers, and then report back to the board.
This move followed the Reserve Bank of India's (RBI) rejection last week of Tata Sons' application to deregister as a Non-Banking Financial Company (NBFC), which required the holding company to list on stock exchanges as a top-tier NBFC in accordance with RBI rules.