Construction Giant Shapoorji Pallonji Group to End 70 Years Relationship with the Tatas

The Shapoorji Pallonji (SP) Group, the largest minority shareholder in Tata Group has said it is willing to exit its decades-old position in Tata Sons. The SP group has an 18.5 percent stake in Tata Sons, the holding company of the Tata Group, on the back of a decades-long relationship. But the two groups have been embroiled in a legal battle since 2016 when Cyrus Mistry, scion of the family that controls the SP Group, was sacked as chairman of Tata Sons. A fresh battle is expected over the valuation of its stake, with the SP Group likely to demand Rs. 1.78 lakh crore. The Mistry family-owned group’s decision, after it failed to get a favorable order in the Supreme Court on Tuesday could bring to an end a four-year legal and boardroom battle.

“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,” states the statement by the SP group. SP Group told the SC on Tuesday that a separation from Tata Group “is necessary due to the potential impact this litigation will have on livelihoods and the economy.” The statement said it is crucial to reach an early resolution that is fair and equitable, reflecting the value of the underlying tangible and intangible assets.

A generation of Tata leaders were retiring with implications on the future governance of the Group.

It is crucial to reach an early resolution that is fair and equitable, reflecting the value of the underlying tangible and intangible assets

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, 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. The Mistry family was in the midst of raising funds against the security of their personal assets to meet the crisis arising from the global pandemic. The action by Tata Sons to block this crucial fundraising, without any heed for the collateral consequences, is the latest demonstration of their vindictive mindset, the SP group said.

The fundraising was important for the Mistry group as its construction business is under pressure due to the pandemic. Besides, the SP group has defaulted on loans taken from its listed entity S&W Solar. “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,” it said.