The SP Group has urged Tata Sons to prioritise its proposal to buy back shares worth around Rs 25,000 crore at its next board meeting, as the debt-laden conglomerate seeks funds to repay borrowings, people familiar with the matter said.
The group has not withdrawn the proposal, which Noel Tata placed before the Tata Sons board at its previous meeting, the people said. The Reserve Bank of India’s (RBI) subsequent directive requiring Tata Sons to pursue a listing has not changed the SP Group’s need to unlock value from its investment.
The SP Group has also welcomed the RBI’s regulatory move, they added.
SP Group seeks to monetise 18.4 per cent Tata Sons stake
The proposal envisages monetising part of the SP Group’s approximately 18.4 per cent stake in Tata Sons, held through Sterling Investments Corp and Cyrus Investments. The proceeds would be ring-fenced for debt repayment.
The group submitted a plan for a selective capital reduction over 18 months, targeting gross proceeds of at least Rs 25,000 crore. The proposal envisages a valuation based on income-tax fair value.
The SP Group did not comment on the development. Officials close to the matter said Tata Sons could decide how to facilitate the monetisation, including through a buyback, a special purpose vehicle or another structure.
However, a share buyback immediately after a potential Tata Sons listing could complicate the listing process, the people said.
Recent refinancing eases immediate pressure, but debt remains
The SP Group recently cleared bond repayments of approximately Rs 3,500 crore after securing fresh funding commitments from most of its existing lenders. This eased near-term liquidity pressure and helped the group avoid a possible default ahead of a September deadline.
However, officials said the conglomerate still needs capital to manage its debt burden.
In July, the group completed a Rs 21,500 crore refinancing. It had told investors that it planned to monetise part of its Tata Sons holding through a listing or share sale within 18 months.
The SP Group has pledged its Tata Sons stake against borrowings. Unlocking value from the investment could help strengthen its financial position and meet repayment obligations.
Selective capital reduction may require NCLT approval
Experts said a selective capital reduction could offer a route for the SP Group to monetise its stake. However, the process would require regulatory approval and scrutiny of the valuation and treatment of shareholders.
Uday Ved, tax partner at KNAV, said selective share buybacks could be undertaken through capital reduction under Section 66 of the Companies Act, 2013, subject to approval from the National Company Law Tribunal (NCLT), rather than through a conventional buyback under Section 68.
Ved said valuation and fairness to all shareholders could become contentious during the NCLT process. The board would also need to assess the use of funds for capital reduction against the need to preserve resources for future growth, particularly if Tata Sons eventually lists.
RBI listing directive deepens Tata Sons ownership debate
The funding request comes amid uncertainty over Tata Sons’ future ownership and regulatory structure.
The RBI rejected Tata Sons’ application to surrender its registration as an upper-layer non-banking financial company (NBFC) and directed it to comply with the applicable regulatory framework.
Under RBI rules, upper-layer NBFCs must list their equity shares on a recognised stock exchange within three years of being identified in that category.
SP Group chairman Shapoorji Pallonji Mistry backed the RBI’s decision last month, describing a listing as a means to improve transparency and public accountability. His position differs from that of Noel Tata, who opposes a public listing.
Tata Trusts, which collectively hold a majority stake in Tata Sons, have said they have not agreed to a listing and that alternatives should be considered. The trusts have argued that preserving the existing ownership structure would help sustain philanthropic activities funded by dividends from Tata companies.
The outcome of the SP Group’s proposal will depend on Tata Sons’ assessment of the available options, regulatory requirements and the implications for its ownership structure.
