The valuation of Tata Sons, the holding company of around 100 companies, has become a contentious issue in the Tata-Mistry legal battle, leaving aside the ouster of Cyrus Mistry and the issue of minority rights protection. Mistry family, which holds 18.37 per cent stake in Tata Sons, values their shares at Rs 1.75 lakh crore, while Tata group believes it would be maximum of Rs 80,000 crore. The legal experts say the Supreme Court could bring clarity in the valuation, with the consent of both the parties.
However, the issue is whether both parties agree for an independent valuation of assets under the monitoring of the Supreme Court or not. Legal experts say it will be difficult for both parties to agree for an outside evaluator as it will force them to accept even an unfavourable valuation.
"The buyer's and the seller's right to bargain will be curtailed in a court-monitored sale process. For the Mistrys, it will be a huge financial loss if the value is lesser in an independent valuation. If the value is high as Mistrys demanded, Tatas will find it tough to buy the assets. It will force them to accept Mistrys selling the stake to outside parties," a Mumbai-based corporate lawyer said.
The valuation has become a complex issue as the difference in price expectations is about Rs 1 lakh crore. Mistry camp is pointing at the market value of Tata Sons' holding in companies like TCS (over Rs 10.5 lakh crore), Titan (Rs 1.3 lakh crore), among others. The holding company has 72 per cent stake in TCS, while it has around 53 per cent stake in Titan.
However, the salt-to-software conglomerate has many loss-making/underperforming assets under its fold. Besides, the group companies like Tata Steel, Tata Motors and Tata Power have huge financial liabilities on its balance sheet. Tata Motors has Rs 1.33 lakh crore gross debt, while Tata Steel has Rs 1.14 lakh crore consolidated gross debt on books.
Tata group on Thursday rejected the Mistry family's offer to swap their stake in Tata Sons for equitable stakes in various group companies. Senior counsel Harish Salve, appearing for the Tatas, termed the settlement proposal as "nonsense" as they claim "oppression" in one company but asking for stakes in more companies. Salve earlier argued the Mistry family's shareholding in Tata Sons is worth not more than Rs 70,000 crore to Rs 80,000 crore.
In October, Tata Sons indicated its intention to buy the Mistry family stake. Subsequently, the Mistrys-controlled Shapoorji Pallonji (SP) group filed a scheme of separation in the Supreme Court as a part of additional relief in the minority shareholders' oppression case.
The National Company Law Appellate Tribunal (NCLAT) said in its 2017 order that Mistrys invested around Rs 1 lakh crore in Tata Sons, out of Rs 6 lakh crore of its total investments. Tata group has contested the order. Tata Trusts own 66 per cent stake in Tata Sons, while the rest is owned by various Tata group entities.