Tata Trusts Chairman Noel N Tata placed a proposal before the Tata Sons board to provide the Shapoorji Pallonji (SP) Group liquidity by buying back part of its stake in Tata Sons for a minimum gross consideration of ₹25,000 crore.
Tata Sons has historically been privately-held, with Tata Trusts holding around 66% and the SP Group having around 18.4% stake in the company.
Tata Trusts reiterates Tata Sons should remain privately-held
Tata Trusts, at the Tata Sons board meeting on Thursday, reiterated that the latter should remain unlisted and asked it to explore all available options prior to considering a public listing, post the Reserve Bank of India (RBI) rejecting its application to voluntarily surrender its NBFC registration.
Noel Tata’s tabled the proposal received from the SP Group at the Tata Sons board meeting on Thursday. It followed discussions between Noel Tata, SP Group Chairman Shapoor Mistry and Tata Sons Chairman N Chandrasekaran.
As per the proposed structure, Sterling Investments Corporation Pvt Ltd. as well as Cyrus Investments Pvt. Ltd, which hold Tata Sons shares on behalf of the SP Group, would sell enough shares that will generate at least ₹25,000 crore. The buyback would be conducted in two stages over 18 months.
Tata Sons would initiate a selective capital reduction process via the National Company Law Tribunal (NCLT), while the shares would be valued using the fair value method prescribed as per the Income Tax Rules.
In simpler terms, the proposal would permit the SP Group to turn part of its holding in Tata Sons into cash without requiring an entire stake sale.
Noel Tata suggested avenues to raise funds for the buy back part of the SP Group’s stake via internal cashflows, sale of listed shares, bringing investors into newer businesses and listing some of the Tata businesses via an offer for sale (OFS).
Why Afcons Infra is in focus and why Tata Sons listing is key for SP Group
Afcons Infrastructure is part of the SP Group, which has been looking at avenues to unlock value from its holding in Tata Sons as it manages its debt obligations.
Over the years, SP Group has used its Tata Sons holding as collateral for multiple financing transactions. Its most latest refinancing, which completed in July, raised around ₹21,500 crore largely against the Tata Sons stake.
However, the group now faces a repayment obligation of around ₹3,500 crore by September-end and failure to meet the payment could potentially be treated as an event of default by the lenders, an August 27 Moneycontrol report had stated.
The report added that the SP Group had also used proceeds from the Afcons Infrastructure IPO and the Gopalpur Port sale to reduce part of its promoter-level debt.
Afcons Infra Stock
Shares of Afoncs Infra were trading 3.2% lower at ₹258.65 apiece at 9.23 am. The stock has fallen 7.7% in the past month and has declined 34.2% this year, so far.
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