The Shapoorji Pallonji Group on Tuesday told the Supreme Court of India that it would exit from Tata Sons provided it gets an early and a fair, equitable solution. With this, the 70-year old relationship between two of India’s biggest groups will come to an end.
The SP group, which owns 18.5 per cent stake in Tata Sons, in a statement said a separation from the Tata Group is necessary due to the potential impact this continuing litigation could have on livelihoods and the economy. “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,” it said.
"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," it said.
The statement came within hours of the Tata group informing the SC that it is ready to buy out SP group stake. The Supreme Court today barred the Mistry group from pledging or selling its stake in Tata Sons and asked the Mistrys to maintain status quo until its next hearing on October 28, when it starts hearing final arguments in the case.
As the largest minority shareholder owning an 18.37% stake, the role hitherto played by the SP Group, was always one of guardianship with an aim to protect the best interests of the Tata group, the group -- which is facing a financial crisis due to Corona pandemic, said. The SP Group had always used its voting rights as a shareholder for the best interest of the Tata Group.
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"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."
The statement said in 2012, when Cyrus Mistry, the scion of SP group, 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 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,” the statement said.
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 operational losses have increased by an additional 11,000 crores, or the Group’s aviation businesses,” the statement said.
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 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,” the statement said.
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Tata Sons has 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 Pandemic. The 150 year old SP Group – is the second largest construction group in the country, executing projects of national significance in India and abroad.
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 fund raise, without any heed for the collateral consequences is the latest demonstration of their vindictive mind-set.
"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," said he.
