While the SP Group seeks to manage its debt obligations, Tata Trusts remains firm in protecting the integrity of its Articles of Association, ensuring that Tata Sons shares remain tightly controlled.
Tata Trusts has reiterated its opposition to the Shapoorji Pallonji (SP) Group’s plan to use its 18.4% stake in Tata Sons as collateral for new loans. According to a report by Mint, Siddharth Sharma, CEO of Tata Trusts, stated that Tata Sons shares are not freely transferable and cannot be pledged without adhering to the company’s Articles of Association.
Tata Group Vs SP Group
The SP Group intends to use its Tata Sons shareholding to secure new loans, aiming to replace existing liabilities totaling ₹22,000 crore ($2.6 billion) due by March 2025. The shares are already pledged against current loans, and the group plans to transfer them to new investors to raise funds for repayment.
However, Sharma emphasized that the use of Tata Sons shares as collateral is not endorsed by Tata Trusts. “All transfers are subject to the provisions set out in the Company’s Articles of Association,” he said, referencing the rules instituted after Tata Sons’ conversion to a private company in 2017. This conversion came after the removal of Cyrus Mistry as chairman, further tightening restrictions on share transfers.
Tata Trusts Opposition To SP Group Plan
The resistance to SP Group’s plan stems from the unanimous stance of Tata Trusts’ four-member executive committee. The committee, which oversees the operations of the eight philanthropic entities owning 65.9% of Tata Sons, opposes the transfer of shares to new investors.
The committee includes Noel Tata, chairman of Tata Trusts, Venu Srinivasan, chairman emeritus of TVS Motor Ltd, Vijay Singh, former defence secretary, Mehli Mistry, a businessman and cousin of the late Cyrus Mistry.
This group reviews proposals before presenting them to Tata Trusts’ board of trustees. While Ratan Tata previously influenced decisions significantly, under Noel Tata’s leadership, the board now acts on the committee’s recommendations collectively.
SP Group’s Position
According to a Mint report, an SP Group spokesperson acknowledged that the Articles of Association restrict the free transfer of Tata Sons shares, consistent with its status as a private company. However, the spokesperson highlighted that the Supreme Court’s 2021 judgment affirmed SP Group’s ability to raise funds by pledging its shares. Over the past three years, the group has secured capital from global investors using this mechanism.
Noel Tata’s Role
According to some media reports which speculated that the Tata Group might adopt a more conciliatory approach towards the SP Group under Noel Tata’s leadership, given his family ties to the Mistrys. However, Siddharth Sharma’s statement makes it clear that Tata Trusts will maintain its longstanding opposition to such share transactions.
The ongoing disagreement shows the complexities of balancing financial strategies with governance rules within the Tata Group.