How To Value Tata Sons And The Mistry Family’s Stake
India’s largest conglomerate by revenue is in the midst of a legal separation from its partner of 70 years, the Shapoorji Pallonji Group.
Tata Group is open to buying out the stake held by its largest minority shareholder—the billionaire Mistry family—as part of a proposal to help end a years-long legal dispute between the two parties triggered by the ouster of Cyrus Mistry as chairman of the parent Tata Sons Pvt. The Mistry family, in a statement, also said it's time to exit Tata.
Why Are The Mistrys Selling
Tata Sons told the Supreme Court that it's willing to purchase 18.38% stake owned by the cash-strapped Shapoorji Pallonji Group, which is raising funds to repay debt. The SP Group owns the stake through Cyrus Investment Pvt. and Sterling Investments Corporation Pvt.
Cyrus Investments has pledged 37,122 shares, or its entire 9.18% stake in Tata Sons, according to a filing in the Supreme Court reviewed by BloombergQuint. In all, it raised Rs 5,900 crore by offering Tata Sons shares as a collateral to Axis Trustee Services Ltd. and IDBI Trustee Services. Cyrus Investments, in court filings, said this 9.18% is valued at more than Rs 75,000 crore.
The Value Of Tata Sons
One part of Tata Sons value is linked to the market value of its investments or stakes in group companies. All listed Tata Group firms had a combined market capitalisation of Rs 7.9 lakh crore as on Sept. 22.
That's close to Rs 7.13 lakh crore estimate by Crisil in its August report.
In addition, Tata Sons valued its investments in unlisted and joint ventures at more than Rs 27,000 crore, according to its balance sheet for 2018-19.
Tata Sons is also the owner of the Tata brand and the associated Tata trademark. The brand is valued at $20 billion (Rs 1.47 lakh crore), according to the Tata website citing the latest Brand Finance report.
Tata Sons will, however, be subjected to a holding company discount, according to Deven Choksey, managing director at KRChoksey & Co. The listed assets be valued at a discount of around 25%, unlisted assets at a 50% discount, while there will be no discount on the brand value, he said.
Going by these assumptions, Tata Son is valued at more than Rs 7.5 lakh crore.
Tata Sons and the Shapoorji Pallonji Group, controlled by the Mistry family, declined to comment.
Still, the two parties may negotiate the value. And it's not clear if Tata Sons will buy back the stake or rope in investors for it. India's largest group, however, would be wary of offering a board seat given the acrimonious end to its association with the Mistry family.