Tata Trusts Puts ₹25,000 Cr SP Group Liquidity Plan Before Tata Sons Board

Tata Trusts Chairman Noel N Tata has placed before the Tata Sons board a proposal from the Shapoorji Pallonji Group to monetise part of its stake in Tata Sons, potentially opening a route to resolve the group's liquidity needs without forcing a public listing of the Tata conglomerate's holding company.

Under the proposal, Sterling Investments Corporation Pvt Ltd and Cyrus Investments Pvt Ltd - entities that hold the SP Group's Tata Sons shares - would sell enough shares to generate gross proceeds of at least ₹25,000 crore, Tata Trusts said in a statement.

The transaction would be based on a valuation determined under Rule 11UA of the Income Tax Rules, 1962.

The proposal envisages completing the buyout in two tranches over 18 months. It would also require Tata Sons to initiate a selective capital-reduction process before the National Company Law Tribunal, or NCLT.

No final agreement has been announced.

Noel Tata asked the board to consider ways of raising the funds, including Tata Sons’ internal cash flows, the sale of listed investments, bringing investors into newer businesses and potential offers for sale linked to the listing of some operating companies.

He also sought authorisation for Tata Sons’ operating team and Tata Trusts to continue discussions with the SP Group and its bankers, and to report back to the board.

The proposal follows earlier discussions involving Noel Tata, Tata Sons Executive Chairman N Chandrasekaran and SP Group Chairman Shapoor Mistry.

Tata Trusts said the initiative continued and reaffirmed its desire to find a "fair and equitable solution" for the SP Group's Tata Sons holding.

The SP Group owns roughly 18% of Tata Sons and has long sought to unlock value from the privately held holding company. Its stake is a significant asset, but is difficult to monetise because Tata Sons is unlisted.

The group's liquidity pressure has intensified as it seeks to manage borrowings and repayment obligations. A negotiated buyback or capital reduction could provide the SP Group with cash while allowing Tata Sons to remain privately held.

The proposal comes days after the Reserve Bank of India rejected Tata Sons' application to surrender its registration as a core investment company. That decision revived the possibility that Tata Sons may have to comply with listing requirements applicable to upper-layer non-banking financial companies.

The plan could offer Tata Trusts and Tata Sons an alternative to a public offering. A listing would create a market-based valuation for Tata Sons, increase disclosure requirements and potentially alter the balance of influence among the Tata Trusts, other shareholders and outside investors.

A buyback or selective capital reduction, by contrast, could provide liquidity to the SP Group without a full Tata Sons IPO. It would reduce the size of the SP Group's stake and potentially increase Tata Trusts' relative influence, depending on the structure.

The plan proposes to preserve Tata Sons' private-company status, subject to regulatory and court approvals.

It, however, would require scrutiny of valuation, shareholder treatment and the legality of the capital-reduction process.

The structure is likely to be closely examined because Rule 11UA tax valuation may differ significantly from the valuation that the SP Group or other shareholders might seek in an eventual public-market transaction.

The proposal adds another layer to the wider contest over Tata Sons' future, which already involves a leadership dispute, the RBI's listing decision and disagreements over the holding company's governance.

For the board, the immediate challenge will be to determine whether it can finance a ₹25,000 crore transaction, secure the necessary regulatory and tribunal approvals and avoid creating new disputes among shareholders.

For the SP Group, the proposal could deliver a partial exit from Tata Sons while retaining exposure to the conglomerate. For Tata Trusts, it could help preserve control and keep the holding company private - but only if the transaction survives valuation, legal and regulatory scrutiny.