Tata Sons director Noel Tata has reportedly sent two letters to the company's board, requesting a thorough review of a significant funding proposal from minority shareholder Shapoorji Pallonji (SP) Group and an evaluation of Tata Trusts' restructuring plan.
SP Group's ₹25,000 Crore Buyout Proposal
The SP Group, which holds approximately 18.38% of Tata Sons, has put forth a proposal for a selective capital reduction. This initiative aims to enable Tata Sons to acquire SP's shares for ₹25,000 crore. The payment would be disbursed in two or more tranches over an 18-month period, with the buyout price determined at fair market value by a qualified merchant banker or registered valuer.
Noel Tata has specifically asked management to assess the proposal's terms, valuation, and implementation timeline. He expects a comprehensive resolution to be presented for the board's consideration and vote at the upcoming November 26 meeting.
Funding Mechanisms and Approvals
Potential funding sources for the buyout include internal cash flows, the sale of holdings in some listed companies, third-party investments in newer businesses, and possible listings of those businesses followed by an offer for sale. The proposal explicitly states that it does not involve public borrowing. Implementing this capital reduction would necessitate shareholder approval via a special resolution, written consent from SP shareholders, sanction from the Mumbai bench of the National Company Law Tribunal, and other crucial regulatory clearances.
Evaluation of Tata Trusts' Restructuring Plan
In a separate communication, Noel Tata called for an evaluation of a proposal from Tata Trusts dated September 28. This plan involves merging Tata Electronic Systems Solutions and Tata Consulting Engineers with Tata Sons. The trusts, which collectively own 66% of Tata Sons, believe this restructuring would transform Tata Sons into both an operating and a holding entity.
This strategic move aims to help Tata Sons navigate regulatory criteria, potentially moving it outside the classifications of a non-banking financial company (NBFC) and a core investment company. The proposed resolution also mandates obtaining a prior no-objection certificate from the Reserve Bank of India before filing the amalgamation scheme with the National Company Law Tribunal or the central government.
Board Meeting and Prior Divisions
Both proposals are slated for discussion at the November 26 board meeting. These requests follow a contentious board meeting on September 17, where divisions emerged over chairman N. Chandrasekaran’s reappointment and the potential listing of Tata Sons. Noel Tata reportedly opposed both of these earlier proposals, while other directors offered their support. Tata Sons remains classified by the RBI as an upper-layer NBFC, which mandates its listing within three years of identification.