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What is the cost of Cyrus Mistry's exit from Tata Sons?

April 07, 2021 14:44 IST

With the Supreme Court not getting into the valuation part and leaving it to the two parties, lawyers said there was nothing much for Mistry Group to negotiate.

With the Supreme Court upholding its position, Tata Group may offer an exit to the Mistry family from Tata Sons on the basis of the valuation by chartered accountant Y H Malegam, who in 2016 had put a figure of Rs 3.14 trillion to the holding company.

“The valuation can be updated taking into account the latest stock prices and the Mistry family can be given an exit,” said senior lawyer H P Ranina.

In 2016, the Mistry family’s stake of 18.4 per cent in Tata Sons was valued at Rs 57,600 crore.

 

But the family had estimated it at Rs 1.75 trillion late last year, taking into account the Tata brand value.

The court said the value of the Mistry family’s stake as of March 2016 was around Rs 58,441 crore while its purchase price was Rs 69 crore.

Besides, during the period from 1991 to 2016, Mistry Group had received dividends of Rs 872 crore, giving it a huge windfall.

The Mistry family had bought a stake in Tata Sons in 1965 and was offered a board seat in 1980.

“The Supreme Court judgment has made sure that minority shareholders are doomed in a private company.

"Now the Mistry family does not have any other option but to take whatever valuation is offered by the Tatas.

"The other option for them is to only get a dividend offered by Tata Sons every year,” Ranina said.

During the court hearing, Tata Sons counsel Harish Salve had pegged the valuation of Mistry Group’s shares at Rs 80,000 crore.

R S Loona, managing partner of Alliance Law, said after the judgment, the Mistry family would have to find ways to unlock its stake in Tata Sons.

“The valuation of TSL shares is a complex exercise and Malegam’s previous valuation is a good template on which to start work,” he said.

With the Supreme Court not getting into the valuation part and leaving it to the two parties, lawyers said there was nothing much for Mistry Group to negotiate.

“The Mistry family can take the valuation offered by the Tatas and pay its debt to banks.

"The court has made sure that the Tatas will not even have a nuisance value in the company,” Ranina said.

The court said valuation depended upon the worth of Tata Sons’ stakes in listed equ­ities, unlisted equities, immovable assets, etc.

Lawyers said Tata Group or its nominees could buy back the Mistry family’s shares in tranches in the next few years while offering it an exit.

"There may be investors interested in associating with Tata Group and they can buy the Mistry family’s shares with the for­mer’s approval,” Ranina said.

Tata Trusts, which own 66 per cent stake in Tata Sons, cannot buy additional stakes because the law does not permit such tra­nsactions by charitable trusts.

Mistry Group has sought from its lenders a restructuring of its debt worth Rs 23,000 crore.

Earlier the Supreme Court did not allow Mistry Group to raise funds from Brookfield by pledging Tata Sons shares.

The judgment has not given clarity whether it can at all pledge Tata Sons shares.

Photograph: PTI Photo

Dev Chatterjee in Mumbai
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