Shapoorji Pallonji Group’s plan to raise £1.1 billion by pledging a part of its interest in Tata Sons has hit a roadblock after the holding company of the Tata Group moved the Supreme Court seeking a stay on the process. Tata Sons filed an ‘urgent’ application with the apex court to restrain SP from raising capital against pledging its interests in the shares of the company. The construction and real estate group, controlled by billionaire Pallonji Mistry and his family, holds 18.4% in Tata Sons and its stake is worth over £10 billion.
Tata Sons moved legally after SP inked an agreement to raise £375 million from Canadian investor Brookfield by offering a part of its stake in the holding company of the Tata Group as collateral. Describing the move by Tata Sons as “vindictive”, “oppression of minority shareholder rights” and “intended to inflict irreparable damage”, SP is seeking the dismissal of the application as “creation of pledge on shares does not amount to transfer of title of the shares” and that the title of the shares continue to remain with the pledgor.
SP has been looking to raise $1.5 billion to tide over the financial crunch caused by the Covid pandemic after economic activity across the world came to a standstill early this fiscal. It has been seeking structured debt deals as the pandemic delayed its plans to sell assets. “This vindictive move by Tata Sons is solely aimed to create delays and roadblocks in the fundraise that will jeopardise the future of 60,000 employees and over 100,000 migrant workers who draw sustenance by working at various SP Group facilities,” said the enterprise’s spokesperson, adding that it is “intended to inflict irreparable damage on the group”.
SP pointed out that Tata Sons’ Articles of Association (AoA) only regulate the transfer of shares, with its board having a right of first refusal to buy at fair market value the shares of any member who is seeking to sell them. There is no provision in the AoA that restricts the creation of a pledge or encumbrance.
“The security documents, which are in the public domain, clearly record that lenders would comply with Tata Sons AoA in the event they seek to enforce the pledge of shares. Tatas have suppressed this vital information in their application in a desperate attempt to mislead the Supreme Court,” said the SP spokesperson.
