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Rs 1 Lakh Crore—The Gap Between Tata, SP Group’s Valuation Of Mistry Shares

Tata Sons says the Mistry family stake is worth Rs 70,000-80,000 crore.

Ratan Tata (left), and Cyrus Mistry. (Source: BloombergQuint)
Ratan Tata (left), and Cyrus Mistry. (Source: BloombergQuint)

The Supreme Court of India has been presented with two different valuations of the Mistry family's stake in Tata Sons Pvt. Ltd., the holding company of the Tata Group.

The Mistry side, in an earlier affidavit, pegged that value of its 18% at around Rs 1.75 lakh crore. But the counsel for Tata Sons told the court on Tuesday that they believe the value is in the range of Rs 70,000-80,000 crore.

The top court began hearing a batch of appeals challenging the National Company Law Appellate Tribunal's ruling, which had last year set aside the removal of Cyrus Mistry as the executive chairman of Tata Sons and as director of three other group companies. A bench headed by the Chief Justice of India SA Bobde will hear the settlement offer presented by the Mistry side to bring an end to the dispute.

NCLAT Went Beyond Powers Of Judicial Review: Tata Sons

Representing Tata Sons, Senior Advocate Harish Salve argued during the hearing on Tuesday that the NCLAT judgment amounted to giving control of the company to minority shareholders.

There was no ground on which the NCLAT could have come to the conclusion that there was oppression of the minority shareholders, he said. The test, argued Salve, for arriving at such a conclusion is whether there is a lack of probity in running a company.

He highlighted that a decision that may have not worked out in the hindsight cannot be a basis of a claim of oppression or mismanagement. The launch a car project which took a downturn and a telecom venture which did not turn out as anticipated cannot be a basis for a claim of oppression, said Salve.

'Company Performed Amazingly Under Ratan Tata'

Salve also drew the attention of the bench towards the performance of the company during the tenure of Ratan Tata when it grew 500%. There will always be some projects which turn out well and some which don’t, he said.

The Mistry firms, according to him, were not at all oppressed but were in fact getting their dues and more from Tata Sons, he said.

The right of the minority shareholder is to get dividends which Tata Sons had been doing; and if one went strictly by the numbers, then the Mistry side did not have a right to even get one representation on the board, he argued.

How The Dispute Landed In The Supreme Court

In September, the Mistry family announced its intention to seek a separation of interest from Tata Sons. The decision came after four years of litigation, most recently a Supreme Court ruling that barred the Shapoorji Pallonji Group from pledging or selling any Tata Sons’ shares.

On Oct. 29, the Mistry side submitted an affidavit in the top court where it suggested a share swap arrangement in listed entities of Tata Group in lieu of the shares held by them in the unlisted Tata Sons, the holding company of the Tata Group.

The plan of separation proposed by the SP Group included:

  • A selective reduction of capital at Tata Sons thereby extinguishing shares held by them.
  • In exchange, SP Group be granted shares in listed companies of the group.
  • Also, cash consideration or shares for brand value, unlisted assets, etc.

In case, Tata Group didn’t want to part with stocks in a particular listed entity, say for reasons of maintaining a certain shareholding level, according to the separation proposal, SP Group was willing to accept shares of Tata Consultancy Services Ltd. or cash.

“The net asset value of 18.37% stake of the SP Group in Tata Sons is estimated more than Rs 1,75,000 crore. Disputes over valuation can be eliminated by doing a pro-rata split of listed assets (share price value is known) and pro-rata share of the brand (brand valuation is already done by Tata Group and published)," the SP Group said. "A neutral third-party valuation can be done for the unlisted assets adjusted for net debt (that is, debt less cash)."

The dispute between the Tata Group and the Mistry family stemmed from the sudden ouster of Mistry as chairman of Tata Sons in October 2016. Soon after, Mistry and firms controlled by the Mistry family approached the National Company Law Tribunal in Mumbai with a suit of oppression and mismanagement against Tata Sons. While the NCLT ruled in favour of the Tatas, the order was reversed by the National Company Law Appellate Tribunal.

Tata Sons challenged the NCLAT ruling in the Supreme Court, where the case is pending.

The top court will continue hearing arguments by Salve, followed by Senior Advocate Abhishek Manu Singhvi and others on behalf of the Tatas side.

Once they conclude, Senior Advocate CA Sundaram and Shyam Divan will argue on behalf of the Mistry family.

The three-judge bench also comprises Justice AS Bopanna and Justice V Ramansubramanian.

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