The billionaire Mistry family, the largest minority shareholder of the Tata group, said it needs to separate its interests after India’s biggest conglomerate took steps to block the family’s attempt to borrow money against Tata shares.
Tata Sons Pvt. informed the Supreme Court Tuesday that it’s open to buying out the 18% stake owned by the Mistry family’s cash-strapped Shapoorji Pallonji group if the latter needed to raise money for paying maturing debt. The SP group instead wanted to borrow funds using the shares as collateral, a move Tata considers as potentially risky because the securities may end up falling in the hands of unfriendly investors. “The action by Tata Sons to block this crucial fund raise, without any heed for the collateral consequences, is the latest demonstration of their vindictive mind-set,” the SP group said in a statement late Tuesday. “It is with a heavy heart that the Mistry family believes that a separation of interests would best serve all stakeholder groups.”
It didn’t specify what any separation would entail.
A representative for Tata Sons declined to comment. The acrimonious divorce between the two groups would end a 70-year partnership that has seen Pallonji Mistry, the 91-year-old patriarch of the family, become a billionaire and help the Tata group swell to a $113 billion software-to-cars empire. The Tata stake accounts for about a third of Pallonji’s $22.5 billion wealth, according to the Bloomberg Billionaire’s Index. His son, Cyrus, has been locked in a bitter legal fight with Tata since he was ousted as chairman of Tata Sons in a 2016 boardroom coup.
The Supreme Court on Tuesday barred the Mistry group from pledging or selling any Tata shares until October 28, when it starts hearing final arguments in the case.
Mistry’s empire, which includes real estate, infrastructure and home appliances, was in preliminary discussions to borrow as much as $1 billion by pledging a part of its Tata Sons stake to pay maturing debt after asset sales stalled amid the coronavirus pandemic, Bloomberg News reported in March, citing people familiar with the matter.
“The Shapoorji Pallonji group is in a financial mess,” said Arun Kejriwal, director at KRIS, an investment advisory firm in Mumbai. “This is the first time the group has expressed willingness to sell Tata shares because the water has gone over its head. The best option before the group is to sell the stake to the right suitor to tide over the crisis.”
The SP group had ₹9,280 crore ($1.3 billion) in external debt at its main holding vehicle, Shapoorji Pallonji and Co. Pvt., as of end-February, as per Care Ratings Ltd. The group-wide debt was estimated by the firm to be more than ₹30,000 crore as of March 2019.