Tata vs Mistry: Shapoorji Pallonji Group submits terms of separation in SC, seeks pro rata distribution of group assets

The high voltage legal dispute between Tatas and Shapoorji Pallonji Group may be headed for a finale, with the latter formally submitting terms of separation before the Supreme Court (SC). The "Scheme of Distribution of Assets" envisioned by Shapoorji Pallonji Group seeks not a cash-buyout of its 18.47 percent stake, but rather a separation of assets, in proportion to the shareholding.

SP Group has submitted a three-part formula before the SC, valuing its stake in Tata Sons at over Rs 1.75 lakh crore.

In the first part of the formula, SP Group has sought pro rata distribution of shares in listed entities of Tata Sons. For example, the affidavit explains that TCS, where Tata Sons enjoy a 72 percent holding, SP Group can be allowed 13.22 percent stake, as per its 18.47 percent shareholding in Tata Sons.

In the second part of the formula, the affidavit proposes for SP Group to be allowed a pro rata share of brand value adjusted for net-debt.

In the third part of the formula, the Pallonji Mistry-founded company seeks expedited valuation through a valuer decided by consensus for unlisted entities.

Claiming that the proposal is fair and equitable, Pallonji Group argued that non-cash settlement will ease pressure on Tata, as it won't have to raise a large quantum of debt to buy out SP Group's stake.

The affidavit also submits that SP Group's separation scheme will minimise room for dispute on valuation as the value of listed entities can be as the last traded price, and the value of the brand can be as per the last valuation report.

The affidavit also clarifies that Tata Sons would continue to enjoy control over underlying assets. Pallonji Group has claimed that the scheme can be used to provide much needed liquidity to Tata Group companies and that this separation scheme will be easier to implement with minimal disruption to operating companies.