R Krishna Das
The devastating effect of Covid-19 had cast its shadow on India’s largest conglomerate as pandemic could be one of the reasons for ending the 70-year old partnership between Tata and Mistry families.
The partnership, which survived post-independence upheaval in the country and economic liberalisation in 1991, is now all set to end. The Tata Group had offered to buy the Mistry family’s 18.37 per cent stake in holding company Tata Sons. And, the Mistry family had told the court it’s “time to separate from Tata.
Almost four years ago, the Tata Sons board ousted chairman and substantial shareholder Cyrus Mistry that marked the beginning of the end of the Tata-Mistry relationship. Both parties have since been locked in several rounds of litigation at the National Company Law Tribunal and the Supreme Court.
The Covid-19 effect on the financial health of the Shapoorji Pallonji (SP) Group, the biggest minority shareholder in Tata Sons headed by Mistry, was learnt to be one of the prominent reasons for the development. The Group told the Supreme Court on September 22 that due to the impact of the ongoing litigation with the Tata’s “on livelihoods and the economy”, it is necessary to exit and separate from the Tata group.
The Tata group had played spoilsport to SP Group’s move to raise funds for dealing with the financial crises arising out of pandemic. The former moved the Supreme Court to restrict the SP Group from raising capital against their shareholding in Tata Sons and address debt obligations which were pegged at around Rs 30,000 crore in March 2019.
The COVID-19 pandemic has put further pressure on the SP Group, which has significant interests in the real estate and construction segments. This was reflected in the liquidity crisis that hit the group company Sterling and Wilson Solar which struggled with loan repayments.
The SP Group peg the valuation of their 18.37 per cent stake at Rs 1,78,459 crore. If struck, it would be the mother of all deals in the history of corporate India. Now, the trillion dollar question is, will the Tatas agree to this valuation or will they play hardball.
After all, money is learnt to be the major factor for this corporate divorce.
Short and sweet