Ratan Tata, Cyrus Mistry differed over listing of Tata Sons

Ratan Tata and Cyrus Mistry
The National Corporate Law Tribunal (NCLT) is set to hear in early January a petition opposing plans to make Tata Sons a private company. The petition has been filed by ex-chairman Cyrus Mistry. 

Mistry and Ratan Tata, chairman of Tata Trusts, differed over fundraising plans of Tata Sons just before the infamous spat between the duo erupted in October last year, documents filed before NCLT show. There were differences over plans to take Tata Sons private this year as well.

In June 2016, Tata rejected a proposal by Mistry, then Tata Sons chairman, to issue bonus shares to Tata Sons shareholders, saying it would lead to an additional liability for the parent company. Since 2014, Tata, in fact, was of the view that Tata Sons should issue Differential Voting Rights (DVRs) with an overseas listing so that the company can meet its obligations. 

In a letter to Mistry on June 13, 2016, Tata said the bonus issue of Tata Sons would lead to the additional burden of Rs 300/350 crore per annum (assuming a bonus issue of Rs 4,000 crore). Tata was responding to a suggestion by Mistry who suggested either selling TCS shares to raise funds or offer bonus shares.

Tata said any proposal to give something back to shareholders could be justified only if the company has large cash balances with no debt. “We have debated this in the case of TCS and it was agreed by all concerned that the simplest way of doing this is to pay higher or special dividends to its shareholders, Tata Sons does not qualify under the above parameters,” Tata said.

When contacted, both Tata Sons and the Mistry family declined to comment.

According to documents, Tata first suggested listing Tata Sons abroad in October 2014 with differential voting rights (DVRs) but his proposal was not supported by Mistry, who said DVRs along with the holding company status of Tata Sons would lead to 30 per cent discount to the actual value of assets. 

Elaborating, Mistry replied to Tata on June 18 that any discount of over 20 per cent over the underlying assets of Tata Sons would be a loss of economic value to its shareholders. Mistry, whose family holds 18.5 per cent stake in Tata Sons, said one had to look at structural ways such as putting aside a sum of money every year to do buybacks of shares if the discount widened. “We would have to do detailed disclosure of the governance at the decision-making process of the Trusts and the Tata Sons board. 

A listing would create pressure from shareholders for short-term results limiting the ability of the group to invest in next generation of businesses. Post listing there would be pressure to list the company locally,” Mistry said. Many global investor bodies have denounced DVRs as investor-unfriendly, he had said.  

War of the Titans

October 2014: 
Ratan Tata moots Tata Sons to list DVRs abroad

May 2016: 
Tata trusts withdraw Rs 4,000 cr from Tata Sons for tax reasons

June 2016:  
Cyrus Mistry opposes DVRs saying it leads to discount, offers bonus shares

Tata rejects bonus share plans, says it will add to Tata Sons burden

October 2016: 
Mistry removed as Tata Sons chairman 

September 2017: 
Tata Sons to go private, Mistry opposes in NCLT


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