Tata Trusts, which owns 66% of Tata Sons, is worried about potential legal issues with lenders if SP Group defaults.
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Tata Trusts has made it clear that Tata Sons shares cannot be transferred, amid concerns over the Shapoorji Pallonji (SP) Group’s intention to use these shares to refinance a hefty $2 billion debt.
Tata Trusts, which holds 66% of Tata Sons, is worried about potential legal issues with lenders if SP Group defaults. The Mistry family-led SP Group has already pledged their entire 18.5% stake in Tata Sons to secure funds.
“As is publicly known, Tata Sons’ shares are not freely transferable,” Tata Trusts chief executive Siddharth Sharma told the Economic Times.
The ET report quoted a source as saying that refinancing above 18.75% will increase costs for the debt raised at (group company) Goswami Infratech. The Shapoorji Pallonji Group has offered additional assets as a security and is in advanced talks with Power Finance Corp (PFC) to raise over $2 billion in debt.
In September 2024, SP Group has to make a scheduled payment of about $216 million for Goswami Infratech’s $1.7-billion raise via non-convertible bonds last year.
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SP Group’s entity Evangelos Ventures raised $1.5 billion from Ares and Farallon in 2021 and 2022. This loan is priced at 22% and will increase to 28% if not refinanced by March 31, 2025. The group is looking at refinancing options with various lenders to reduce high costs.
Tata Sons’ Articles of Association 57-61 govern the transfer of shares in case of a shareholder default, according to the report. The pledged shares is a different matter altogether because it wasn’t addressed in the Supreme Court’s ruling on March 26, 2021, favouring the Tata Group in the case of Mistry’s dismissal.
The ET, quoting a person close to the SP Group, said that it believes there is no restriction on its ownership over the shares and the right to raise capital against them. The person goes on to add that there has been no fault on part of Shapoorji Pallonji till date.
On March 26, 2021, the Supreme Court set aside an order by the National Company Law Appellate Tribunal (NCLAT) restoring Cyrus Mistry, of the Shapoorji Pallonji Group as the Tata executive chairman. Mistry had succeeded Ratan Tata as the chairman of Tata Sons in 2012 but was ousted four years later.
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The top court had upheld the Tata Group’s decision to remove Mistry. SC also dismissed a plea of Shapoorji Pallonji Group seeking the separation of ownership interests in Tata Sons.
