The Shapoorji Pallonji (SP) Group, which has had a relationship with the Tata Group for over seven decades said on Tuesday that it was time to exit from Tata Sons.
The SP Group has been the largest minority shareholder in Tata Sons, with an 18.37 per cent stake. However, the relationship soured after Cyrus Mistry was unceremoniously sacked as the chairman of Tata Sons in October 2016.
“The SP-Tata relationship spanning over 70 years, was forged on mutual trust, good faith, and friendship. Today, it is with a heavy heart that the Mistry family believes that a separation of interests would best serve all stakeholder groups,” the SP Group said in a statement.
This effectively means that the SP Group may be willing to sell its stake it has held through two investment firms.
“The SP Group stated before the Supreme Court that a separation from the Tata Group is necessary due to the potential impact this continuing litigation could have on livelihoods and the economy. They stated that 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,” according to the statement.
The SP Group has said that when Mistry had been appointed the chairman of Tata Sons in 2012, he had tried to establish a governance structure that would institutionalise accountability and create the right checks and balances. Unfortunately, he was removed in October 2016, when he attempted to implement the governance reforms, it added.
A long legal battle has followed since Mistry’s ouster from Tata Sons. Hit by the COVID-19 pandemic, the SP Group had pledged some of the shares to raise funds. Tatas had objected to the move and had approached the top court seeking to restrain the SP Group from raising capital by pledging their shares in Tata Sons.
It said that the Tata Sons had amplified its institutional efforts to “suppress and inflict irreparable harm” on the SP Group, in the midst of a global crisis triggered by the COVID-19 pandemic.
“The Mistry family were in the midst of raising funds against the security of their personal 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. The action by Tata Sons to block this crucial fundraise, without any heed for the collateral consequences is the latest demonstration of their vindictive mindset,” the SP Group said.
Earlier on Tuesday, the Supreme Court ruled in the favour of Tata Sons after it ordered a status quo on the transfer of or pledging of the stake held in Tata Sons. The apex court had said it would take up the matter for hearing of final arguments on October 28.
“The current situation has forced the Mistry family to sit back and reflect on the past, present and possible future for all stakeholders. The past oppressive actions, and the latest vindictive move by Tata Sons that impact the livelihoods of the wider SP Group community leads to the inexplicable conclusion that the mutual co-existence of both groups at Tata Sons would be infeasible,” added the SP Group.
The SP Group has blamed the current leadership of Tata Sons for taking “value destructive” business decisions.
“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 crore 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,” it said.
Excluding TCS, the last quarter's losses of all the listed group companies of about Rs 14,000 crores causes “great concern,” it added.
“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,” it further said.
