Mumbai: Shapoorji Pallonji Group and Tata Sons held fresh discussions to explore the monetisation of an estimated 7% in the Tata group holding company, according to people familiar with the matter.
SP Group has a 18.37% stake in Tata Sons and wants to sell some of that to repay part of its estimated debt of ₹60,000 crore.
The two sides remain divided over the structure and valuation of a potential transaction, said the people cited. Among the proposals on the table was a share-swap arrangement, under which SP Group would receive a basket of listed Tata group company shares in exchange for part of its Tata Sons stake, they said.
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While recent Reserve Bank of India directives on upper layer non-banking finance companies (NBFCs) have fuelled speculation that a listing of Tata Sons could become a possibility over time, there is little clarity on whether this will materialise anytime soon.
People familiar with negotiations said Tata Trusts chairman Noel Tata, SP chairman Shapoor Mistry and Tata Sons chairman N Chandrasekaran held a round of discussions first, where Tata favoured a framework under which Tata Sons would not raise debt to facilitate a deal.
Executives of Tata Sons and Tata Trusts participated in follow-up discussions. They included Farokh Subedar, a confidant of Tata and a consultant to Tata Trusts.
Valuation was also a key stumbling block, said the people cited. The two sides were unable to bridge differences over the value of the unlisted Tata Sons stake and listed Tata group shares that could potentially form part of any swap arrangement.
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At Odds over Route to Monetisation
The combined market capitalisation of the group's 16 listed companies was ₹25.28 lakh crore on Thursday, with Tata Sons' stakes in these firms valued at about ₹11.9 lakh crore. The condition of not raising debt was regarded by the Mistry family, which runs SP Group, as commercially impractical, reinforcing its long-held preference for a listing of Tata Sons as the most efficient route to unlock value without additional encumbrances. Noel Tata is understood to be opposed to listing Tata Sons.
Noel Tata, Tata Sons and SP Group did not comment.
Talks have also sparked debate within sections of Tata Trusts. Some officials have privately pointed out that Tata had, about a year ago, maintained that he would not be involved in matters relating to SP Group's shareholding as he's related to the Mistry family. Tata's wife Aloo is Shapoor Mistry's sister. The executives now question whether his reported involvement reflects a shift away from that earlier position. However, another executive close to Noel Tata said he can certainly have a say in the matter as chairman of Tata Trusts, which holds 66% of Tata Sons.
Last week, ET reported that SP Group received commitments worth about ₹21,500 crore for the first tranche of its refinancing plan, with the issue fully subscribed by domestic and overseas investors. The fundraising includes ₹15,200 crore of three-year rupee bonds priced at a yield of about 18.95% and about $650 million of dollar bonds expected to yield around 14.5%. The deal is expected to close on July 20.
The refinancing is being done through Eqyizen Investment, an SP Group entity, and is backed by the group's 18.37% stake in Tata Sons. The money will be used to replace part of its expensive debt with longer-term funding. Much of the confidence in refinancing SP Group's debt stems from the backing of pledged Tata Sons shares, executives said.
Within 18 months of issuance, the company must secure either an announcement of Tata Sons' IPO or agree terms for a stake settlement involving Tata Sons, SP Group and, if applicable, a third-party buyer.
