In the biggest corporate battle that India Inc has seen, the Tata-Mistry fight, the recent turn of events triggered by the Supreme Court's stay on Shapoorji Pallonji Group pledging or transferring the 18 percent stake held in Tata Sons incited an emotional outburst from the warring camp which has now said parting ways is the only way. But, how arduous will be this process? Will Tata and Mistry smoke a peace pipe?
Advisor to Tata Trusts, VR Mehta said, "There is a lack of confidence between the two parties and that makes things even more difficult." He said valuations of Tata Group could become a contentious point.
Shapoorji Pallonji Group's public statement accepting a separation from Tata Group did not look like handing out an olive branch but more as a decision made out of no choice to raise funds at a difficult time like this when the group needs cash to survive.
This could be a complicated affair, given the various restrictions under the Companies Act, namely Tata Trust cannot buy out the shares, nor can subsidiary Tata Consultancy Services (TCS). According to the Articles of Association, Right Of First Refusal (RoFR) lies with the Tatas on the buyer and then the structuring of the transaction will also be critical.
Cherag Balsara, advocate at Bombay High Court, said, "Tata Group could find a suitable buyer for the stake or shares of subsidiary companies could be transferred to SP Group, these are the two ways it can be done." He also pointed out that in either of these cases, valuations will be the bone of contention.
Shailesh Haribhakti, chairman, Shailesh Haribhakti Associates, throws light on determining the fair value for the transaction. He pointed out that the largest weightage in any valuation for a listed company should be given to the market value. There are other methods to back test market value, "profit earning capacity value and net assets value." For the unlisted assets, amongst the above methods, market value derived from similar listed assets can be used as a benchmark.
While the Tata Group may look at the option of funding the exit by bringing in other investors, proxy advisory firm iiAS' Amit Tandon points out, "The group is structured in a way that there are pulls and pressures from different directions. You have the trust which has a charitable and social commitments that the Tatas have made over a 100 years...then there are listed companies with a profit motive. How do they marry these objectives which often conflict with each other? The group does need a solution."
Many experts share with CNBC-TV18 that other options like carving out a company and handing over to Shapoorji Pallonji Group like the infrastructure based assets can also be an option.
Out of the box solutions may also be worked out in the interest of the settlement, industry insiders share. But, all eyes are still on the legal tangle as VR Mehta says the transaction will proceed after the Supreme Court will make its order clear. The next Supreme Court hearing on the matter is on October 28.
There are two possibilities in future for this Battle Royale, either a protracted legal battle or very tough negotiations by the best deal makers in the country. While this will be the most complicated transaction and highest stakes battle of our times, the only consolation could be that the tallest leaders of India Inc have signed up to mediate for an amicable settlement, sources privy to the developments told CNBC-TV18.
First Published: IST