It’s over, but not much. The Supreme Court of India (SC) on Friday upheld Tata Sons’ decision to remove Cyrus Mistry as its executive chairman in 2016 and then transform itself into a private company. The Supreme Court has quashed orders issued by the National Company Law Appellate Tribunal in 2019 seeking the reappointment of Mistry as Tata Sons chief. Two-thirds are owned by various Tata trusts and 18.4% by Mistry’s Shapoorji Pallonji (SP) group. Since Mistry was hired as a professional manager rather than a share-owner, he too could be fired from that role and the allegations that the minority shareholder was treated unfairly could not be sustained. The obscure aspect of this case is the validity of the clamp on SP shares held long ago by the Tata Sons Articles of Association (AoA). Our judiciary found no reason to intervene and refused to go into the details of the split, leaving Tata and SP to resolve the question of how to cancel their equity tangle and go their separate ways.
The presence of the AoA clutch led Tata to try to prevent SP from mortgaging any of its shares of Tata Sons last year after mortgaging half of its stake, meaning the chips were stacked in favor of the majority owner. SP is not only built for cash, it has less wiggle room: it can only resell its stake to Tata or a company approved by it. While the SP may not explicitly deny the possibility of the SP using its shares as collateral for credit, which could lead to a transfer of ownership, perhaps Tata could enforce AoA’s acceptance rule to deter the SP. However, there may be an irony in counting Mistry. Established on the code of ethics, Tata’s brand values call for a divorce agreement that is seen as publicly justified. It depends to some extent on the financial value of that brand. As noted by SC, “The value of SP Group’s shares is based on the value of Tata Sons’ stake in listed equities, unlisted equities, fixed assets, etc., and also on the funds raised by the SP Group on the security pledge. These shares. “The discrepancy in the estimates that SP’s stake is worth going forward. Last year, the SP Group valued its stake in an unlisted company ₹1.75 trillion, Tata insiders pushed exaggeratedly. The value of Tata Sons pieces of listed group companies can be easily obtained from the market prices. Price tags for its close businesses can also be crunched by a formula for the current value of future cash flows accepted by both parties. It sees other assets, hairs fall apart and split. Of these, the Tata brand can prove to be the most tied.
UK-based brand finance, which uses the template for a brand owner to pay for its rent if it does not actually pay its rent, has pegged Tata’s value as a brand at 20 billion. But this does not require the SP to qualify for the 18.4% slice. The brand is also inseparable and its use is under the executive control of Tata Sons, which collects royalties on group companies and has its own calculus of its value. Exactly what part of the SP can claim.