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Published On: Tue, Sep 22nd, 2020

Shapoorji Pallonji Group agrees to exit Tata Sons

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cyrus-ratan-tataMUMBAI: The Shapoorji Pallonji Group (SPG) on Tuesday informed the Supreme Court that it would exit the Tata Group  an acrimonious development that, if carried out, will end an over 70-year-old relationship between some of India’s biggest corporate behemoths.
In a statement released on Tuesday evening, the Mistry family-led group, which owns a nearly 18.5% stake in holding firm Tata Sons through two investment companies, said that a separation was necessary due to the impact that “continuing litigation could have on livelihoods and the economy”.

“It is crucial that an early resolution be reached to arrive at a fair and equitable solution reflecting the value of the underlying tangible and intangible assets,” the statement by the SP group said.
“The Shapoorji Pallonji-Tata relationship spanning over 70 years, was forged on mutual trust, good faith, and friendship,” the company said in a statement.
“Today, Shapoorji Pallonji Group stated before the Supreme Court that separation from Tata Group is necessary due to potential impact this continuing litigation could have on livelihoods and the economy,” the company said.
“It is with a heavy heart that the Mistry family believes that a separation of interests would best serve all stakeholder groups,” said Shapoorji Pallonji Group in a press statement.

This essential means that the SP Group, which holds 18.4% stake in Tata Sons through its two investment firms, is willing to sell their stake and move out of the company.

This statement comes after a protracted legal battle which started in December 2016 after Cyrus Mistry was ousted as Chairman of Tata Sons in October 2016. SP Group said Tata Sons has been taking “value destructive business decisions” ever since Mistry’s sacking.
“It is extremely unfortunate that the current leadership of Tata Sons has not only continued to take value destructive business decisions in a misguided effort to prove a point in these proceedings.
It is a matter of public record that several issues identified years earlier, continue to plague the group. Be it the operations of Tata Steel UK, where over the last three years alone the operational losses have increased by an additional 11,000 crores, or the Group’s aviation businesses.
“These actions, or lack thereof, have meant that the total debt in the major Tata group companies has increased by approximately 100,000 crores in the last three years. Excluding TCS, the last quarters losses of all the listed group companies of approximately 14,000 crores causes great concern.
Unfortunately, the impact of these actions continue to hurt minority shareholders, be it the SP Group at Tata Sons or the millions of shareholders of the listed companies in the Tata Group,” said SP Group.
SP Group told the Supreme Court in a filing today that a separation from the Tata Group is necessary due to the potential impact this continuing litigation could have on livelihoods and the economy.
“Today, it is with a heavy heart that the Mistry family believes that a separation of interests would best serve all stakeholder interests” a statement said. It was crucial that an early resolution is reached to arrive at a fair and equitable solution reflecting the value of the underlying ..
“Today, it is with a heavy heart that the Mistry family believes that a separation of interests would best serve all stakeholder interests” a statement said.
It was crucial that an early resolution is reached to arrive at a fair and equitable solution reflecting the value of the underlying tangible and intangible assets. In the midst of a global crisis triggered by the COVID Pandemic, the Mistry family were in the midst of raising funds against the security of their personal assets to .. assets to meet the crisis arising from the global pandemic.
This move was undertaken to protect the livelihoods of its 60,000 employees and over 100,000 migrant workers. A statement from the SP group said 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.
As the largest minority shareholder owning an 18.37% stake, the role hitherto played by the SP Group, was always one of .. was always one of guardianship with an aim to protect the best interests of the Tata group.
The SP Group had always used its voting rights as a shareholder for the best interest of the Tata Group. It is a matter of record that prior to the year 2000, when the Tata Trusts, being Public Charitable Trusts, couldn’t exercise their voting rights , the same being held by a Public Trustee, the SP Group voted to protect the best interests of the Tata Group.

In 2012, when Cyrus Mistry accepted the position of Chairman of Tata Sons, it was not only with a sense of pride, but also with a sense of duty as an ‘insider’ on the Board of Tata Sons. The Tata Group was going through significant change. A generation of Tata leaders were retiring with implications on the future governance of the Group.
Several of these leaders who were retiring from the Board of Tata Sons also served as Trustees of the majority shareholders – Tata Trusts. It is in this context .. that Mr. Mistry set about trying to establish a governance structure that would institutionalize accountability, and create the right checks and balances, without contravening the new SEBI Insider Trading law that regulated the flow of information across all stakeholders.
Unfortunately, he was removed in October 2016, when he attempted to implement these governance reforms. It is extremely unfortunate that the current leadership of Tata Sons has not only continued to take value destructive business decisions in a misguided effort to prove a point in these proceedings.
It is a matter of public record that several issues identified years earlier, continue to plague the group. Be it the operations of Tata Steel UK, where over the last three years alone the operation .. operational losses have increased by an additional Rs 11,000 crores, or the Group’s aviation businesses.
These actions, or lack thereof, have meant that the total debt in the major Tata group companies has increased by approximately Rs 100,000 crores in the last three years. Excluding TCS, the last quarters losses of all the listed group companies of approximately Rs 14,000 crores causes great concern.
Unfortunately, the impact of these actions continue to hurt minority shareholders, be it the SP Group at Tata Sons or the millions of shareholders of the listed companies in the Tata Group. Tata Sons has amplified its institutional efforts to suppress and inflict irreparable harm on the SP Group, the statement said.
(With Inputs from media reports).

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