Tata-Mistry Feud Deepens With Plan to Change Holding Firm
Here’s what Tata group is doing to restrict Mistry’s family from selling their stake.
(Bloomberg) -- Tata Group’s feud with one of India’s richest families deepened after the country’s biggest conglomerate moved to change its holding company’s legal status to one that would restrict the Mistry family’s ability to sell its stake to external investors.
Shareholders of the closely held company, Tata Sons Ltd., are scheduled to vote Sept. 21 on changing its registration to a private limited entity rather than a public one, Pradipta Bagchi, a spokesman for the group, said by telephone Friday. The Mistry family plans to vote against the proposal, according to a letter to Tata Sons seen by Bloomberg.
The move comes almost a year after patriarch Ratan Tata ousted Cyrus Mistry as chairman of the $105 billion cars-to-software group, sparking a corporate showdown that has yet to fully conclude because Mistry’s family still owns more than 18 percent of the holding company. The proposal to alter Tata Sons’ status amounts to “oppression of the minority interests,” the Mistry family’s investment fund wrote in a Sept. 14 letter to the holding company.
“The true effect of converting the status of Tata Sons into a private company is to introduce/reintroduce restrictions on transferability of shares,” Cyrus Investments said in the letter. “We urge you to withdraw the AGM notice and the proposal.”
The Tata Sons proposal requires at least 75 percent of shareholders to pass, Bagchi said.
Tata, founded in 1868, named Natarajan Chandrasekaran to take the helm in January after a feud between Ratan Tata’s allies in the company and Mistry over the latter’s strategy of paring back the empire built through more than a decade of acquisitions.
As Mistry looked for ways to pare the conglomerate’s debt-laden sprawl, growth lagged. At the same time, Chandrasekaran helped turn the group’s software maker Tata Consultancy Services Ltd. into a profit machine, boosting its market value more than 10 times since 2009.
Tata Sons is currently a public limited company. That means the Mistry family could legally sell its stake to one of Tata’s rivals, for example, something a private limited company shareholder could not do, according to India’s Companies Act.
“This means less transparency, less flexibility,” said Sandeep Parekh, managing partner at Mumbai-based Finsec Law Advisors over phone. “This restricts the transferability of shares in Tata Sons by making them less liquid.”
--With assistance from Siddharth Philip
To contact the reporter on this story: Bhuma Shrivastava in Mumbai at bshrivastav1@bloomberg.net.
To contact the editors responsible for this story: Young-Sam Cho at ycho2@bloomberg.net, Dave McCombs