Representatives of Noel Tata, the Tata family patriarch, are exploring a potential share swap arrangement where the Shapoorji Pallonji Group would receive shares of listed Tata entities in exchange for its 18.4% stake in privately-held Tata Sons. According to sources familiar with the discussions, the proposal involves the SP Group receiving shares of listed companies such as Tata Power Co. in exchange for some part or its entire stake in Tata Sons Pvt., the privately held holding company of the conglomerate. This proposal represents one of three options being considered to unlock liquidity for the SP Group, which is seeking funds to repay costly debt. The discussions are private and being conducted with representatives of both Tata Sons and the Shapoorji Pallonji Group, with no immediate comments offered by either party.
The discussions come as the Shapoorji Pallonji Group closed one of the largest private credit transactions in India in July, with investors hopeful that the conglomerate can eventually monetize its Tata Sons stake and unlock liquidity worth billions of rupees. As reported by The Times of India, a breakthrough in the long-standing dispute between Tata and the SP Group would bring significant relief to investors holding SP Group debt, which includes the likes of Cerberus Capital Management LP, Davidson Kempner Capital Management, and Farallon Capital Management. A resolution needs to come through within the next 18 months as that's the timeline when SP Group's recently closed bond issue will need to make its first payout. The bonds sold by Eqyizen Investment Private offered 18.95% and will mature in 36 months, with the first interest payment due in July 2028.
According to sources familiar with the discussions, two other options have been presented to the SP Group: a direct buyout of the construction giant's stake by Tata Sons, financed by overseas banks, or a sale to an external investor, preferably a global one. A major hurdle in the negotiations will be agreeing on a valuation for Tata Sons, which controls the sprawling salt-to-software conglomerate and has many large unlisted businesses such as Air India Ltd. and i-phone maker Tata Electronics Pvt Ltd. under its umbrella. Both sides are evaluating legal aspects of all options being discussed as well as potential regulatory issues around the share swap since it will involve listed Tata entities. SP Group is also periodically updating its stakeholders on the negotiations, while advisers are examining the legal implications of the various structures under consideration.
For the Tatas, a resolution may ease some of the intense regulatory spotlight it has come under in the past few years after the central bank's rules revived pressure on its holding company to list on the exchanges. Noel Tata is the chairman of Tata Trusts, a group of charities that own 66% in Tata Sons, with Natarajan Chandrasekaran's announcement this month that he'll step down as Tata Sons chairman in February putting Noel in the driver's seat to drive a settlement. Notably, Noel Tata also holds family ties to the SP Group – he is married to Aloo Mistry, sister of SP Group Chairman Shapoor Mistry. There's no certainty that the ongoing talks will lead to a deal, and the structure of the transaction may change as negotiations proceed, according to sources familiar with the discussions.
