Noel Tata At The Helm, SP Group Mulls ₹25,000 Cr Plan To Monetise Tata Sons Stake

Shapoor Mistry, chairman of the Shapoorji Pallonji Group, has reportedly sought around ₹25,000 crore from Tata Sons over the next 24 months in exchange for part of the group’s stake in the Tata conglomerate’s unlisted holding company.

The SP Group owns an estimated 18.37% of Tata Sons and is exploring ways to monetise around 7% of its holding, according to a report in The Economic Times. Mistry has sent a proposal to Tata Trusts chairman Noel Tata, which is expected to be discussed by Tata Sons executives as both sides seek a resolution, the report said.

The latest proposal comes as the SP Group faces pressure from lenders and seeks to refinance its high-cost debt.

SP Group Explores Multiple Routes

Mistry had been in talks with Tata Sons chairman N Chandrasekaran and Noel Tata on monetising the stake until July. Chandrasekaran announced in early August that he would not seek reappointment after his term ends in February 2027 and has not taken part in further discussions, according to executives aware of the situation.

Progress in the talks has been limited due to differences over the structure and valuation of a potential transaction.

One proposal involved SP Group receiving shares in a basket of listed Tata companies in exchange for part of its Tata Sons stake.

More recently, representatives of Noel Tata and the Shapoorji Pallonji Group have been discussing a possible share swap as one of several routes to monetise the group’s 18.4% holding in Tata Sons, Bloomberg reported.

Under the proposal, SP Group could receive shares in listed Tata companies, including Tata Power, in exchange for part or all of its stake in the privately held holding company, according to the report.

The discussions are private and there is no certainty that they will result in a transaction, news agency reported.

A share swap is also being considered as a potential route for SP Group to unlock the value of its Tata Sons holding, The Economic Times had reported last month.

Tata Sons Buyback Proposal

The latest buyback proposal aims to provide SP Group with cash proceeds over a defined period while allowing Tata Sons to maintain its private company status, which Noel Tata wants to preserve.

Details on the valuation, funding, quantum and timing of any buyback are yet to be finalised.

According to Bloomberg, two other structures have also been discussed. Tata Sons could directly purchase SP Group’s stake, with the transaction financed by overseas banks, or the stake could be sold to an external investor, preferably a global investor.

A key sticking point is likely to be the valuation of Tata Sons, which sits at the centre of the Tata conglomerate and has interests in several large unlisted businesses, including Air India and Tata Electronics.

The parties are also examining legal and regulatory implications, particularly for a share swap involving listed Tata companies, Bloomberg reported.

Advisers are assessing the different structures while SP Group continues to update its stakeholders on the discussions.

Debt Pressure Drives Monetisation Push

The push to unlock value from the Tata Sons stake comes as SP Group manages high-cost debt.

The group completed a ₹21,500 crore refinancing in July. Its borrowing costs currently stand at 18-19%, which it aims to reduce to 12% through future refinancing.

SP Group has repayments of around ₹3,500 crore due by the end of September. Lenders want to see tangible progress in monetising the Tata Sons stake before considering further refinancing or relaxing loan-to-value requirements, sources said.

Failure to make the September payment could be treated as a default. The obligation relates to an earlier financing arrangement and was expected to be met from proceeds of the July funding.

The group’s efforts to monetise its Tata Sons investment have therefore gained greater significance following the July private credit transaction, with investors expecting it to eventually unlock value from the stake, Bloomberg reported.

The potential resolution could benefit investors in SP Group’s debt, including Cerberus Capital Management, Davidson Kempner Capital Management and Farallon Capital Management.

Noel Tata Set To Play Key Role

The discussions have gained greater significance after N Chandrasekaran announced that he would step down as Tata Sons chairman in February.

Noel Tata, who chairs Tata Trusts, which collectively own 66% of Tata Sons, is now expected to play a key role in efforts to settle the long-running dispute.

A resolution is being targeted within the next 18 months, as SP Group’s recently issued bonds require their first interest payment in July 2028, Bloomberg reported.

For SP Group, monetising even part of its Tata Sons holding could provide a significant source of liquidity and help ease its refinancing burden. For Tata Sons, however, any transaction will have to balance the valuation of the holding, its private-company status and the legal and regulatory implications of the proposed structure.