Tata remains the most iconic name in the Indian business circles. The software-to-trucks conglomerate’s reputation remains unmatched as one of the biggest and oldest business empires in the country. For many, Tata is not just a business, rather it is a national brand that probably remains unmatched. But now it is staring into an uncertain future amidst the embitterment of decades-old partnership between two Parsi business families- the Tatas and the Mistry family.
Presently, the two Parsi business families are headed for their next big battle- valuation of a stake in Tata Sons Pvt., at a time when the conglomerate is coming into spotlight as India’s biggest corporate feud.
Actually, the embitterment of ties between the Mistry-clan owned Shapoorji Pallonji Group and Tata Sons Pvt. started when Cyrus Mistry was ousted as Tata Sons Chairman in the year 2016. In 2011, many were surprised when Cyrus Mistry, a non-Tata was chosen as Ratan Tata’s successor and the sixth Chairman of Tata Sons Pvt. Nevertheless, it was well known that SP Group and Tata Sons enjoyed healthy relations outside of business too. Cyrus had joined the Tata board by virtue of his father’s 18.4 per cent stake in the Tata conglomerate. Ironically, the same stake is now at the centre of the ongoing feud.
On September 22, the Shapoorji Pallonji Group announced that it would be exiting Tata Sons as a minority stakeholder, effectively brining curtains down on the old association between the Mistry clan and the Tatas. Anyhow, the SP Group might want a quick deal here because by selling its stake in the Tata business empire, the SP Group wants to raise money for its own cash-strapped business.
On the other hand, Tata has told the Supreme Court that it is ready to buy the stock itself if Mistrys need money for their cash-strapped SP Group business. But both the disputants might think differently of the valuation of the SP Group’s stake in Tata Sons Pvt. Court filings peg the value of the stake at 1.5 trillion rupees ($20.3 billion), but this is going to be a business deal and would eventually depend on which party strikes the harder bargain.
According to Bloomberg, even at depressed values, it will not be cakewalk for the Tata conglomerate or any other investor to bring out such a hefty sum when the COVID-19 Pandemic has ravaged business economies around the world. As of now neither Tata Sons Pvt., nor the SP Group have made any comment. But according to Bloomberg, any outside investor too could be required to first offer equity to the Tatas before looking out for other investors.
Lack of an easy exit will make a hefty purchase less lucrative for outside investors and therefore the situation seems to be becoming more complicated. Shriram Subramanian, founder of proxy advisory firm InGovern Research Services Pvt. in Bangalore said, “The parting of ways will lie in the details as it is not clear they will quickly agree to a valuation.” He added, “Additionally, Tata group is in no hurry while the SP group is hard-pressed for funding.”
SP Group is going to find it hard to attract an outside investor given the closely held character of Tata Sons that can fade the charm of buying into $113 billion business giant. Tata Group itself may not be very keen on striking a quick deal given the not-so-good business environment in India or even the world at large. Tata Sons Pvt. is therefore headed for an uncertain future in the middle of a major corporate feud.