The Tatas and Mistrys try to resolve long-standing issues

NEW DELHI: The almost six-year-long dispute between two of India’s biggest business groups—Tata Sons and Shapoorji Pallonji group—might be on the path to be resolved. The dispute is about getting what the Shapoorji Pallonji group (SP group) claims is its 18% rightful share in Tata Sons, whose market capitalization, as on 31 December 2021, was $314 billion (Rs 23.4 trillion). Its revenue during the same period was $128 billion (Rs 9.6 trillion).
The SP group’s claim is based on the 18.37% stake that it has in Tata Sons, which operates in 160 countries across six continents and employs over 660,000 people in over a hundred operating companies, of which 29 are listed. In September 2020, drawing curtains on its over five-decade-old relationship with the Tatas, the SP group had told the Supreme Court that it wanted to separate itself from the ties by swapping the shares it held. During that period, Tata Sons had stated that it was open to buying the SP group’s shares for a price of Rs 70,000-Rs 80,000 crore. However, the SP group said it should get at least Rs 1.75 lakh crore (or Rs 1.75 trillion), much more than what the Tatas had offered.
As per the legal agreement between the two, Tata Sons has a Generic Right of First Refusal (ROFR), meaning that the SP group can sell its stake in Tata Sons to any other entity only after the Tata Sons refuses to buy it.
Now, with the fortunes of the Tata Sons seeing a mercurial rise (its market capitalization was $145.3 billion in March 2018, compared to $314 billion today), the 18% share of the Mistrys is likely to fetch much more than what it would have in 2020.
As per the Tata Sons March 2022 balance sheet, if the Tatas today agreed on what SP Group was asking, it would have to give roughly Rs 4.4 trillion to them—something that the Mistry family-owned Shapoorji Pallonji group is in need of urgently to expand its reach and tide over the crisis that it is going through.
The problems for SP group, which has been battling financial difficulties for a long time now, have compounded in recent times due to the two tragedies that have affected the family this year. On 28 June, the group’s patriarch, Pallonji Mistry, died in Mumbai at the age of 93. A few months later, in September 2022, his son Cyrus Mistry, died in a car accident at the age of 54. Cyrus Mistry was the younger brother of Shapoor, who was appointed as the chairman of the SP group in June 2012.
This had happened just a few months after Cyrus Mistry was, in November 2011, announced as the successor to Ratan Tata and Chairman of the Tata Sons, after a “search” that went on for 14 months. Cyrus Mistry at the time was only the sixth chairman in the 144-year-old corporate behemoth’s history.
However, the said arrangement died a premature death, when in October 2016, Cyrus Mistry was ousted as the chairman of the company, thereby earning the distinction, albeit a dubious one, of being the chairman of the Tata Group for the shortest time. The earlier “record” was held by Nowroji Saklatwala, the first non-Tata surname chairman, who led the group from 1932 to 1938 before passing away from a heart attack.
Cyrus Mistry was removed by the Tatas ostensibly as he was “undermining” the legacy that was created by his predecessors, which had forced Ratan Tata to interfere in the company’s affairs repeatedly despite retiring. As per court records, more than 550 emails were exchanged between the Tatas and the Mistrys on how to run the group during the time Cyrus Mistry was the chairman. The Tatas were upset with issues like shutting down of the Nano project and decisions taken by Mistry related to other Tata group companies such as Indian Hotels Company Limited and Tata Teleservices Limited.
As per “The Story of Tata: 1868 to 2021”, written by Peter Casey, Pallonji Mistry’s father, Shapoor Mistry (not to be confused with the present chairman of SP group, who too goes by the same name), initially acquired shares in the Tata group in 1967, when he acquired 5.9%. The next purchase by the SP group was in 1969, of 4.81%. The final purchase came in May 1974, of 6.68%. All these three tranches were bought by the Mistrys from the family members of the Tatas. Then, through a “Rights offer” in 1996, the Mistrys brought their total holding in Tata to the 18.405 that it is today.
As per Casey, between 1965 and 1975, the SP group acquired almost 18% shares in Tatas for approximately $11 million. After battling court cases and then facing the ignominy of applying for RBI mandated loan structuring scheme in October 2020, following the Covid pandemic, the SP group under Cyrus and Shapoor Mistry, got an upgraded “A” rating by rating agency ICRA after they were able to successfully exit from the one-time restructuring (OTR) plan worth Rs 12,450 crore, with a repayment of the entire One Time Resolution (OTR) debt plan on 31 March 2022, ahead of the OTR timeline through infusion of funds by promoters, proceeds from monetization of assets and fresh term loan. The SP group is composed of 17 companies that have interest in engineering and construction, infrastructure, real estate, water, energy and financial services.
When it appeared that things were moving in the right direction for the Mistrys after a long time, tragedy struck by way of the death of Cyrus Mistry. According to industry insiders, Shapoor is now taking steps to resolve the dispute with the Tatas that was initiated in 2016 with the ouster of Cyrus Mistry. It is pertinent to mention that Shapoor had inducted his son Pallon Mistry on the board of directors of the group in January 2019. These conciliatory steps, sources said, are being undertaken with the involvement of the common family friends of the Tatas and the Mistrys.
“Much has happened after those unfortunate times of 2016. Shapoor needs to focus on the future and so do the Tatas. The next generation should not pay for the deeds or the misdeeds of their ancestors,” a media personality, who has known both these families, told The Sunday Guardian.
“Shapoor is doing the right thing, something which ideally should have been done a long time ago. None of the two parties are getting any benefits from this dispute. The Mistrys need the cash infusion that they will get by selling their holdings in Tata, as they intend to come out of the financial and family troubles that have started plaguing them since the last few years. Similarly, the Tatas are wary, and rightly so, of the 18% shares owned by the Mistrys falling into the ‘wrong hands’, maybe someone like their business competitors. The best thing for both of them is to reach a common ground and arrive at a mutually beneficial understanding. The involvement of common friends is a good step towards this resolution,” a partner with one of the top three law firms in India told The Sunday Guardian.
The Sunday Guardian reached out to both the Tata group and the Shapoorji Pallonji group, seeking their responses on whether they were engaging to reconcile their differences. No response was received until this report went to the press.