MUMBAI:
Tata Sons on Thursday rejected estranged minority shareholder
Shapoorji Pallonji
’s proposal to swap its 18.4% stake with shares of the company’s
listed
downstream entities. The holding company of India’s largest conglomerate termed the proposal as “nonsense”, while informing the
Supreme Court that “this kind of relief cannot be granted” and that it “is opposing it”.
SP
has sought separation from Tata Sons as a relief in its minority shareholder oppression case.
When asked whether SP’s proposal is tenable at this stage, Tata Sons said, “No. At best, if it (SP) wins the case, the court can ask the majority shareholder to buy out its stake at fair market value.” On Tuesday, Tata Sons had told the SC that it had valued SP’s stake at Rs 70,000-80,000 crore, which is 55-61% lower than the minority shareholder’s estimation of Rs 1.78 lakh crore. SP’s estimation included its proportionate share in the Tata brand value, worth Rs 1.46 lakh crore, according to Brand Finance’s 2020 ranking.
“SP is seeking 18.4% stake in the Tata brand value as well. How can they be rewarded for damaging the Tata Brand?,” Tata Sons argued, and stated that the proposal is “akin to winding up of Tata Sons”. It is interesting that the minority shareholder, who is crying of oppression, wants to compound its woes by seeking pro-rata shares in the listed Tata companies in lieu of its 18.4% stake in Tata Sons, the holding company said.
“Accepting their proposal could cause the issue to spill over from Tata Sons to its listed downstream companies where SP would then be holding minority stakes.” Tata Sons said, “The only way to resolve the deadlock is that one of the two sides bow out. And only the minority can be asked to bow out.”
SP argued that a company being a profit-making one is not a criteria to decide whether there is oppression or mismanagement. “Unfair treatment to a minority shareholder is also an act of oppression,” it submitted. The issue is “whether the affairs of a company are being run in a manner which is prejudicial to members or public interest”. “The whole conduct by which Tata Sons was made a private limited company showed that SP was being sidelined.”
SP further stated that Tata Sons does not do any business on its own, but yet its directors take decisions for the downstream companies. Tata Sons had told the SC that certain matters require assent by majority of the Tata Trusts-nominated directors. Tata Trusts owns over 65% in the holding company and was the force behind the removal of SP scion Cyrus Mistry from the chairman’s post.
The minority stakeholder told the SC that the entire thing came to a head because Mistry was going to table a corporate governance document to regulate Tata Trusts’s say in the holding company so that two nominee directors don’t decide everything for downstream entities. It also submitted that elsewhere, decisions are usually taken by the boards of respective companies but in Tata operating companies, Tata Sons has a role to play in these decisions.
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Reeba Zachariah is assistant corporate editor at The Times of Ind...
Read MoreReeba Zachariah is assistant corporate editor at The Times of India, Mumbai. She has been covering large Indian business houses such as the Tata Group. She also reports on a host of sectors like hospitality, retail, travel, liquor and consumer durables. She has been writing on mergers and acquisitions and private equity.
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