In order to release funds and put an end to the protracted standoff, the Shapoorji Pallonji Group plans to sell a 4–6% stake in Tata Sons.
Tata-SP Stake Deal
A ceasefire between the Tatas and the SP Group could be imminent. According to high-ranking individuals with knowledge of recent events, Tata Trusts and Tata Sons are willing to give SP Group a 4-6 percent stake dilution in Tata Sons. If the transaction goes through, it would provide the SP Group, which has a net debt load of almost Rs 30,000 crore, much-needed cash.
This move coincides with a dispute between two factions of the trustees that has rocked the Tata Trusts, which own 66 percent of Tata Sons, and may prompt government intervention, according to recent reports. In the next days, a few government representatives are probably going to meet with Tata group members in Delhi.
Tata Sons Listing Talks
It is probable that the conference will assess the disparities within the Tata Trust and consider listing Tata Sons. According to reports, the government officials may meet with Noel Tata, the chairman of Tata Trusts; N Chandrashekar, the chairman of Tata Sons; Venu Srinivasan, the chairman emeritus of TVS Motor Company and a board member of Tata Sons; and Darius Khambata, a lawyer and trustee on many Tata trusts.
The Economic Times was the first to report on the potential meeting between senior Tata Group officials and government officials following disagreements among the trustees on October 6.
Although no final decision has been made, Tata Sons may repurchase shares in the event that there is no listing as a means of supplying liquidity. The repurchase approach might take up to a year to complete.
The worry of the government
Some of the sources mentioned suggest that given the amount and type of debt the SP Group has taken out, the government might become involved. According to a source with knowledge of the situation, “a fair portion of finance has been channelized via private credit funds, and the government is determined to guarantee that there is no default on these loans.” “The government does not want a loan failure to occur, especially from a reputable company like the SP Group,” the individual continued.
The Ministry of Finance, SP Group, Tata Trusts, and Tata Sons did not reply to emails prior to the story’s publication. If they do reply, we will update the article.
Not looking for a complete departure
Indeed, the SP Group owed between Rs 55,000 and Rs 60,000 crore in FY25, of which Rs 29,000 crore is said to have been refinanced. To guarantee seamless operations at the entity level, SP Group is reportedly looking for some cash flow relief since the cost of refinancing is far greater than the bank loan.
According to a senior official with knowledge of the situation, a stake sale could provide the SP Group with liquidity support of between Rs 6,000 and Rs 9,000 crore, based on Tata Sons’ net worth in FY25 as reported in its annual report, which was estimated at around Rs 1.5 lakh crore. It is also known that the SP Group as a whole is not eager to sell or liquidate its whole 18.4% interest in Tata Sons. “Holding 12 to 14 percent in Tata Sons could guarantee a consistent dividend flow, which the SP Group members do not want to forgo,” he continued. Tata Sons gave its stockholders a dividend of Rs 1,414.51 crore in FY25.
Different people have different ideas about how much the Tata Group’s unlisted holding company is worth. A recent internal valuation assessment is alleged to have placed the worth of Tata Sons at $70 bn (Rs 6,21,152 crore), of which a 4-6 per cent share is around about Rs 25,000 crore.
“Tata Sons and Tata Trust representatives are probably going to inform the government authorities that there is internal agreement and a readiness to provide cash to the SP Group. This could end the listing of Tata Sons, according to a source who is aware of the events. According to a September 3 Moneycontrol article, the RBI has requested that Tata Trust, Tata Sons, and the SP Group notify the regulator of their ultimate listing decision.
Potential problems
Some of the transaction-related challenges in supplying liquidity to the SP Group could also be considered at the meeting with government representatives, which is probably going to take place in the next few days. According to sources who briefed Moneycontrol, there are two main problems:
1. Any repurchase of shares is expected to generate hefty capital gains tax as per the present Income Tax Act.
2. Without taking on new debt, Tata Sons, which has previously asked the Reserve Bank of India to give up its NBFC licenses, would have to pay for the buyback or repurchase of shares.
The representatives of Tata Sons and Tata Trust may want sweets of some kind, but it is believed that the regulatory and fiscal ramifications of the ceasefire negotiations will prevent them from continuing. “At this time, it is improbable that both parties will receive any exemption,” a source who wished to remain anonymous stated.
Despite the lack of concrete promises thus far, it might take a year or so for the parties to supply SP Group with liquidity.
With 66 percent of the privately held company, Tata Trust is by far the biggest stakeholder in Tata Sons. Despite this, the SP Group owns more than 18 percent of Tata Sons through two companies: Cyrus Investments (9.2 percent) and Sterling Investment Corporation (9.2 percent).
Help prevent IPO
Reaching a compromise between the two groups could also end the SP Group’s five-year-old demand to list Tata Sons shares, as it is currently unable to sell its stake in the company.
An amicable resolution to the listing issue would benefit all parties, according to a senior official who wished to remain anonymous, given the threat of obligatory listing looming over Tata Sons and internal strife among the trustees of Tata Trust.
The Reserve Bank of India issued a directive in October 2022 requiring NBFCs that were determined to be upper-layer entities to list within three years of the classification date. Despite simply being a core investment company (CIC), Tata Sons was categorized as an upper top-layer NBFC due to loans totaling more than Rs 15,000 crore and cross-debt to group firms. According to rating agency reports, the debt, including intercompany exposures, has been retired in the last year.
Tata Sons promised the RBI that it would continue to function as a debt-free organization after giving up its NBFC license in September of last year. The final judgment on Tata Sons’ de-recognition as an NBFC-CIC is still pending, even though the listing deadline of September 30, 2025, has passed.