Tata Trusts Chairman Noel Tata asked Tata Sons management to assess an SP Group proposal to secure Rs 25,000 crore via a capital reduction plan. The SP Group, which controls an 18.38% stake, wants Tata Sons to purchase its shares across an 18-month timeline using asset sales, internal cash flows, or outside investors. A fair market value set by a registered valuer or merchant banker would decide the precise number of shares cancelled under this scheme. Concurrently, management must review an internal merger of two operating subsidiaries to help Tata Sons retain its unlisted status under central bank regulations.
Key points
The buyout relies entirely on non-debt mechanisms such as third-party investments, asset…: The buyout relies entirely on non-debt mechanisms such as third-party investments, asset sales, and internal company cash flows.
Farokh Subedar, a senior adviser to Sir Dorabji Tata Trust, contributed to the capital re…: Farokh Subedar, a senior adviser to Sir Dorabji Tata Trust, contributed to the capital reduction proposal and remains on call to assist management.
Merging Tata Electronic Systems Solutions and Tata Consulting Engineers into Tata Sons ai…: Merging Tata Electronic Systems Solutions and Tata Consulting Engineers into Tata Sons aims to generate operating revenue to bypass non-banking financial company rules.
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Noel Tata is also chairman of Tata Trusts, which majority-owns Tata Sons.
ET has seen two separate letters, both dated October 29 and addressed to Tata Sons company secretary Suprakash Mukhopadhyay. In these letters, Noel Tata has asked the Tata Sons management to present both proposals at the company's upcoming November 26 board meeting, including their valuations, legal and regulatory implications, funding arrangements and implementation timelines.
Matter of Documentation
The SP Group, which owns about 18.38% of Tata Sons, had sought 25,000 crore through a capital reduction plan. Noel said in the letters that he had placed the group's request before the board at its September 17 meeting and now seeks a detailed management assessment.The proposed arrangement envisages Tata Sons buying out shares held by SP shareholders for a gross consideration of 25,000 crore, through a selective reduction of its issued, subscribed and paid-up ordinary share capital. The payment would be made in two or more tranches over 18 months.
The buyout price would be determined at fair market value by a merchant banker or registered valuer, with the number…
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