Tata Sons: Tata Sons shares are non-transferable, the Trusts say.
“As is publicly known, shares of Tata Sons are not freely transferable,” Siddharth Sharma, CEO of Tata Trusts, said in response to an email query from ET about the Trusts’ legal stand on the matter.
SP Group, promoted by the Mistry family, has pledged its entire 18.5% stake in Tata Sons held through the two entities to secure funds from private credit funds such as Ares and Farallon. In addition, it is necessary to raise funds for separate repayment within 3 months and borrow against existing large loans.
Because enforceability remains uncertain, lenders are evaluating whether additional shares could be pledged as collateral. But a source familiar with the matter said, “They are taking comfort in the fact that they have pledged shares as collateral three times in the past.”
agencyShapoorji Pallonji Group has also pledged additional assets as collateral and is currently in preliminary talks with Power Finance Corp (PFC) to raise more than $2 billion in debt.
The SP group did not respond to the query.
The Tata Trusts board has been concerned about rollover of these shares among lenders, an executive aware of the matter said. “There were also apprehensions about the SP group encashing its Tata Sons shares. But SP Group said that as a bona fide shareholder, it has the right to use it as it wants,” said another executive.
Evangelos Ventures, an SP Group entity, has raised $1.5 billion from Ares and Farallon in 2021 and 2022. This price is 22% and can go up to 28% if you don’t refinance by March 31, 2025, when it matures. The group is exploring refinancing options with several lenders to lower costs.
“Refinancing in excess of 18.75% will increase the cost of debt raised by (group company) Goswami Infratech. Therefore, the group is discussing with PFC a plan to refinance its debt and increase new loans at lower interest rates,” he said.
In September of this year, SP Group must pay a scheduled amount of about $216 million for the $1.7 billion raised by Goswami Infratech through non-convertible bonds last year.
discussion topic
Tata Sons Articles of Association 57-61 provide for transfer of shares in case of default by shareholders, officials said.
However, the issue of pledged shares may be subject to legal action as it was not explicitly addressed in the Supreme Court judgment of March 26, 2021 on Mistry’s dismissal in favor of the Tata Group.
“Tata Trusts can legally challenge the group over the share pledge, if necessary,” said Ashish Kumar Singh, partner at Capstone Legal. He said, “Because the content of the case filed in the Supreme Court is not directly related to stock pledge, we have filed an interim application to notify the court of this. Simply dismissing an interlocutory motion does not necessarily prevent the parties from raising the issue again.”
However, Shapoorji Pallonji Group claims that there are no restrictions on its share ownership and right to raise capital as per the Supreme Court ruling.
An SP Group official said, “Additionally, no default has occurred to date, and the group is working to reduce debt as quickly as possible.”
Singh said Tata Trusts may have to challenge it in the National Company Law Tribunal or the High Court.
Once close associates, Tata and SP Group have been at odds since late Cyrus Mistry was ousted as chairman of Tata Sons in October 2016. Since then, the Mistry family’s stake in Tata has been a bone of contention.
