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Mistry seeks US$24b of shares in Tata firms to sever ties

[MUMBAI] Billionaire Pallonji Mistry has sought to swap his stake in Tata, which his group values at US$24 billion, for shares in the listed companies of India's biggest conglomerate as the former partners move to sever ties.

The Shapoorji Pallonji Group told the Supreme Court it estimates its 18.4 per cent stake in the Tata Group's main holding company to be worth more than US$23.5 billion including valuation of the brand. It's seeking pro-rata shares in listed Tata entities, cash, or any marketable instrument in lieu.

This "largely non-cash settlement would ease pressure on Tata to raise large quantum of debt," SP Group said in a statement Thursday. "Disputes over valuation can be eliminated by doing a pro-rata split of listed assets and pro-rata share of the brand." The offer comes nearly a month after the Mistrys announced their intention to sever a 70-year relationship with the coffee-to-cars Tata empire. The family has been locked in a bitter courtroom battle with the US$113 billion conglomerate as it seeks funds for its own cash-strapped businesses.

A representative for Tata Sons declined to comment.

Bulk of this US$24 billion would probably come from Tata Consultancy Services, where SP Group estimates its shareholding translates to 13.2 per cent or about 1.35 trillion rupees (S$24.7 billion) at current values. TCS shares rose 0.4 per cent to 2,632.65 rupees in Mumbai Thursday before the news.

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"It looks unlikely that Tatas will readily agree to this proposal," said Shriram Subramanian, founder of proxy advisory firm InGovern Research Services. Valuation of unlisted firms and the Tata brand are still unresolved, he said.

Also, by splitting the shareholding in listed companies, Tata Sons's equity in those firms will fall and in some cases may "reduce considerably leaving the listed companies susceptible to hostile takeovers," Mr Subramanian said.

SP Group said in its statement that the settlement would leave the Tatas with more than a 51 per cent stake in TCS, India's biggest software services exporter and the group's cash cow.

A holding larger than 10 per cent will give the SP Group certain statutory rights under company law, so key to watch is whether the Tatas will accept the deal or offer a counter proposal, said Souvik Ganguly, founder and managing partner at Acuity Law.

The potential disagreement over the stake value, quoted by the SP Group, is the latest chapter in a four-year-old wrangle that started with a boardroom coup in 2016 at Tata Sons. It led to the abrupt ouster of Cyrus Mistry as Tata Group chairman. Cyrus, 52, is the son of billionaire Pallonji Mistry, 91, who controls the 155-year-old SP Group.

After succeeding Ratan Tata in 2012 as chairman of Tata Sons, Cyrus Mistry sought to reduce the conglomerate's debt in ways that threatened to undo the legacy of the Tata patriarch - who spearheaded the purchases of Jaguar Land Rover and British steelmaker Corus Group. That resulted in his removal and sparked India's worst corporate battle in recent history.

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