TATA V/S PALLONJI – BREAK-UP KAR LIYA

about 1 year ago
No image

 

Nothing lasts forever. That’s the only, never changing, enduring truth.

Every single thing around us is not what it was 5 years ago..right from us – our physical and psychological state to the people around us, the Nature around us and even the very air we breathe. And the most brittle in this chain of change are relationships.

Thus on a spiritual level, it comes as no surprise to see that that the relationship between Shapoorji Pallonji (SP) group and the Tata’s have come to such a bitter end. This, at that time, before Cyrus Mistry was inducted as the CEO, was one of the best – in terms of ideologies, they seemed like such a perfect fit. We did not know if it was the presence of the SP group in the Tata’s which gave it credibility or did the Tata’s reputation enhance because it had someone like SP group as a big stake holder in Tata Sons. They both complimented each other. And in life, when something is so perfect, it has to break.

It is sad that Mistry’s unceremonious ouster brought such an old relation to an end. We did some ‘family tree’ tracing and found that Shapoorji Pallonji, grandfather of Mistry, had bought a 12.5% stake in Tata Sons from FE Dinshaw, who was the Tata group’s advisor, friend and lender of resort in 1936. He bought another 5% from JRD Tata’s siblings - Sylla and Darab around 1938.

The shares of Tata Sons remained as they were for the next 37 years. In 1975, after the death of Shapoorji Pallonji, his son, Pallonji Shapoorji, inherited the Tata stake. A rights issue in 1996 pushed up his stake to 18.5% and then in 2003, Pallonji Shapoorji sold shares in Tata Sons buyback and his stake came down to where it is now, at 18.37%. He is the father of Cyrus Mistry and still very much alive at the age of 91.

Interestingly, Noel Tata, half-brother of Ratan Tata is married to Cyrus Mistry’s sister, Aloo Mistry, who is the single largest shareholder in Tata Sons.

As of now, the two Tata trusts - Sir Dorabji Tata Trust and the Sir Ratan Tata Trust, with six other smaller Trusts, owns 66% of Tata Sons. Pallonji Shapoorji owns 18.37%, Tata group companies own 13% and Tata family members and others hold 3%.

While the relationship as such was broken long time ago, Pallonji Shapoorji will sever all forms of ties by selling all stakes held by him and the SP group in Tata companies.

Yesterday, the Shapoorji Palonji group issued a statement saying that it preferred to completely exit from the Tata group and was necessary to mitigate the potential impact of the continuing litigations on the livelihoods and the economy. The Supreme Court had barred the group from pledging or selling its stake in any Tata company till 28th Oct.

And today, the SP group has valued its stake in Tata Sons at close to Rs.1.78 trillion, based on its holding in TCS, Titan, Tata Motors and unlisted Tata Capital and Tata AIA Life Insurance. It has also assigned a brand value of Rs 1.46 trillion to Tata Sons and wants a proportionate share of the same.

It will be a huge strain on the Tata’s to generate this kind of money. Institutional Investor Advisory Services ( IiAS ), a proxy advisory firm said the Tata’s have three options – to buy out SP group’s stake, Tata Sons, which has a 72% stake in TCS will sell 16% and raise the require money. Second option - sell its non-core assets and pledge the equity of its listed companies to raise debt. Third option – sell the 18.37% stake to PE funds or sovereign wealth funds but that means, allowing entry of ‘outsiders’ into Tata Sons.

It will indeed be interesting to see how Tata’s wade through this crisis. But it does mean that this relationship with the SP group is truly over. Wonder how the SP group will be perceived, once it breaks free from all Tata connections….SP Group itself is strong and enjoys a good brand equity but how much of it came from the reflected glory of being associated with the Tata’s….time will tell.

Popular Comments