About:
Pallonji Mistry the founder of SP Group (Shapoorji Pallonji Group) bought 18.37% stake in Tata Sons from JRD Tata in 1960s.
Currently the Tata Sons the split–up of Tata Sons is as follows
Tata Trusts 66%-
Sir Ratan Tata Trust 23.56%
Sir Dorabji Tata Trust 27.98%
Ratan Tata 0.83%
Tata Investment Corp 0.08%
Sarvajanik Seva Trust 0.09%
RD Tata Trust 2.18%
Tata Social Welfare Trust 3.73%
Tata Education Trust 3.73%
JRD Tata Trust 4%
Pallonji Shapoorji Mistry 0.02%
Sterling Investment Corporation (SP Group) 9.18%
Cyrus Investments (SP Group) 9.18%
Tata Subsidiaries (Tata Power, Tata Consumer Products, Indian Hotels, Tata Industries, Tata Chemicals, Tata Steel, Tata Motors) 13%
Others (Mutual Funds, FII, DII, Insurance Companies, Public) 2.6%
Timeline
1960 – SP Group buys 18% stake in Tata Sons
2005 – Pallonji Mistry retires from the board of Tata Sons
2006 – Cyrus Mistry joins the board of Tata Sons and Director of Tata Power and Tata Elxsi
2013 – Appointed the Chairman of Tata Sons
2016 – Sir Ratan Tata requested Cyrus Mistry to resign his position of Chairman from Tata Sons, Mistry refused then a meeting of Board of Directors was called where 7 Directors were in favour of Ratan Tata’s decision, 1 Director chose to stay silent and 1 Director was against this decision (Mistry himself)
2018 – Mistry’s appeal to NCLT was rejected which was quoted as “mismanagement in the company”
2019 – Mistry’s appeal to NCLAT was accepted which was quoted as “Right of minority shareholder”, Mistry got back his seat in the Board of Directors but refused to hold a position as a Chairman.
2020 – Tata Sons said in a court filing that the company’s brand value eroded under Mistry’ reign and financial performance worsened under his management. Recently in September the SP Group stated before the Supreme Court that a separation from the group serves best interest for all the shareholders of the company.
Why all this happened?
When Mistry was appointed as the Chairman by Ratan Tata, Mistry’s goal was to make Tata Sons a debt free company, and decided to sell off weak assets. He tried to enforce changes that were developed and planned by Ratan Tata himself, like selling off Tata Docomo, Termination of Tata Nano, Selling of Air-Asia etc. Due to clash of conflict the two couldn’t come up with a solution that keeps both happy. Cyrus Mistry and Ratan Tata are said to have exchanged about 550 emails in total regarding the clash of conflict.
1. Ratan Tata had advised Mistry to keep his company’s (SP Group) interests away from Tata Sons but yet many contracts were given through SP Group.
2. Tata Power had a market cap of 18000 Crore in 2016, and Tata Power acquired Welspun Renewable Energy for 9249 Crore which is roughly half of Tata Power’s market cap, such a big deal was closed without a board meeting of holding company Tata Sons. Every fundraiser or acquisition till then had been presented in front of Tata Group.
3. NTT Docomo (Japan’s Telecom company) invested 2.7 Billion dollars in Tata Teleservices for 26.5% stake. This deal was closed under Ratan Tata’s reign with following condition-
a. If Tata Telecom performs exponentially in 5 years then NTT Docomo will raise their stake to 51%
b. If Tata Telecom fails to perform as per company’s listed expectations then Tata Telecom will have to find a buyer for NTT Docomo’s 26.5% stake or buy back themselves for half the price.
Due to RBI guidelines where a company cannot sells its stake to a foreign company as per price decided by them came into play, Tata Sons had to payback by valuation by DCF method, this is because NTT Docomo had won a case against Tata Sons in International Court of Arbitration, Tata Sons wanted this issue to be resolved before it went to the court, as it would spoil their international image and would affect their brand.
Mistry chose to stick to RBI guidelines instead of focussing on brand integrity and promising to stick to existing deal and never to betray the trust of an investor. As Mistry notes, “the non-disclosure of the put option in the Docomo transaction has been interpreted by the Government of India as default on behalf of Docomo and Tata Sons”
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