An initial public offering (IPO) might be a useful tool for the Mistry family to unlock value for stakeholders, as recommended by the Shapoorji Pallonji (SP) Group, which has an 18.37% interest in Tata Sons, according to persons with knowledge of the situation.
The SP Group also highlighted the group firms' excellent performance under the chairman N Chandrasekaran's leadership team at the Tata Sons annual general meeting (AGM) on Monday, raising the possibility that relations between the two parties had softened.
Following the death of former Tata Sons chairman Cyrus Mistry in a traffic accident in September 2022, this is the second AGM to be convened. After Mistry was removed from his position as chairman of Tata Sons in October 2016, the SP Group lost contact with him, and he faced years of legal disputes.
According to a person with knowledge of the situation, "there are no hostilities between the two sides." As a minority stakeholder, the SP Group provided constructive criticism, pointing out that the Tata Group firms' recent performance has significantly improved. All parties involved, including the listed firms that have patiently held the shares for more over thirty years, would benefit from Tata Sons' listing."
"Currently, the IPO market is witnessing a boom and a strong brand such as the Tatas would not only unlock value for the company but also boost overall sentiment of the market," Dhruva stated. "However, it will be a very mammoth and complex task for the bankers and lawyers, given the size and businesses of the group."
Observers of the Tata Group calculate that, based only on the value of Tata Sons' listed portfolio, the SP Group has a holding worth over ₹3 lakh crore.
According to the holding company's annual report for FY24, the group holding company's net profit climbed by 57% to ₹34,654 crore, while sales increased by 25% to ₹43,893 crore. Additionally, Tata Sons gave stockholders their highest-ever dividend—₹35,000 per share. Losses from its aviation division, which includes Air India, decreased over the previous year.
The SP Group raised $2 billion in private credit capital by using all 18.37% of its interest in Tata Sons as leverage to refinance $2 billion in debt.
Along with his elder brother, SP Group chairman Shapoor Mistry, Cyrus Mistry had attempted, but failed, to dispute Tata Sons over his dismissal and had been active in reorganizing the SP Group to prepare it for the future.
According to Uday Ved, a partner at the worldwide tax practice firm KNAV, "the listing of a holding company can unlock the value of downstream subsidiaries—both listed and unlisted and provide better shareholders' return on their investment." "The board of the holding company may take a decision based on commercial and non-commercial parameters whether to consider listing or not.
The SP Group owns a portion of Tata Sons through Sterling Investment Corp. and Cyrus Investments. Sixty-six percent of Tata Sons is controlled by the Tata Trusts. Share transfer is governed by Articles 57–61 of the Tata Sons Articles of Association. These state that a free transfer of shares is not permitted without board consent. Before Tata Sons to ever be listed, these clauses would need to be changed.
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