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Tata Group faces renewed turmoil as the Shapoorji Pallonji Group considers exiting its 18.37% Tata Sons stake, sparking complex legal and financial challenges for the conglomerate
SP Group holds an 18.37% stake in Tata Sons.
A series of developments within the 157-year-old Tata Group, the country’s largest business conglomerate, is drawing renewed attention as the group navigates complex shareholder disputes and strategic decisions. Since the passing of veteran industrialist Ratan Tata last year, the conglomerate has been at the centre of renewed controversies, ranging from internal family disputes to government interventions.
At the heart of the current stir is the potential exit of the Shapoorji Pallonji (SP) Group, Tata’s oldest and largest shareholder. The SP Group holds an 18.37% stake in Tata Sons, a relationship dating back to 1936. For decades, the partnership was marked by cordial ties, but tensions flared in 2016 during the high-profile Cyrus Mistry-Ratan Tata dispute, which escalated to the Companies Tribunal and later the Supreme Court, where Tata Sons emerged victorious.
Now, a decade later, differences between the two families have resurfaced, this time involving Noel Tata and Mehli Mistry. Reports indicate that Tata Sons has begun exploring options to resolve these issues permanently, including the potential acquisition of the SP Group’s stake. The SP Group, facing significant debt obligations, has expressed willingness to divest its holdings in Tata Sons to manage its financial exposure.
Corporate governance rules, however, make any exit complicated. With a stake above 10%, the SP Group qualifies as a promoter, meaning any acquisition or divestment must comply with Tata Sons’ Articles of Association, Reserve Bank of India regulations, and broader corporate norms. Analysts say the group has four primary pathways to manage the potential exit:
- Buyback of SP Group Stake: Tata Sons could directly acquire the SP Group’s entire shareholding. The deal, estimated to require around Rs 3 lakh crore, faces resistance due to the 36% capital gains tax that the SP Group would incur on the transaction, potentially running into thousands of crores.
- Equity Swap: An alternative would be to convert the SP Group’s stake into shares of Tata subsidiaries such as Tata Steel or TCS. This would allow the SP Group to realise funds gradually and address its $1 billion debt due in 2026. However, Tata Sons’ existing Articles of Association currently prohibit such a swap, necessitating rule amendments.
- Sale to an External Buyer: The SP Group could divest to a private equity fund or another external investor. While this approach avoids additional capital outlay by Tata Sons, it requires the conglomerate to be listed publicly, a move long resisted to maintain the group’s private status.
- IPO of Tata Sons: Listing Tata Sons would provide a formal exit route for the SP Group. Yet, this option remains blocked, particularly by the Tata Trusts, which control the group and have been firm in preserving its private ownership.
With these constraints, experts suggest that any resolution will be protracted and contingent on regulatory approvals, including the Reserve Bank of India and potentially the Supreme Court.
October 07, 2025, 17:11 IST
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