Tata Group, SP Group Explore Share Swap And Buyout Options To Unlock Tata Sons Stake

The Tata Group and Shapoorji Pallonji (SP) Group are exploring various options to unlock the value of SP Group's 18.4% stake in Tata Sons, as the construction conglomerate seeks funds to service its high debt, according to a Bloomberg report citing sources familiar with the talks. Representatives of Noel Tata, chairman of Tata Trusts, are examining arrangements where SP Group could receive shares in listed Tata companies, possibly including Tata Power, in exchange for a portion or all of its stake in the privately held Tata Sons.

Two other structures are reportedly being considered: direct purchase of SP Group's holding by Tata Sons using overseas bank financing, or a sale to an external investor, ideally an international buyer. SP Group faces a ₹3,500 crore repayment deadline in September amid pressure from its Tata Sons-backed debt. While no agreement is guaranteed, the transaction's structure could evolve.

Valuing Tata Sons poses a significant challenge due to the holding company's control over multiple businesses and assets across the Tata conglomerate, including unlisted firms such as Air India and Tata Electronics. Both parties are also evaluating the legal and regulatory implications of each alternative. A share swap involving listed Tata companies could trigger further regulatory scrutiny.

The settlement would provide SP Group with substantial liquidity, potentially benefiting its private-credit investors, including Cerberus Capital Management, Davidson Kempner Capital Management, and Farallon Capital Management. SP Group recently completed a large private-credit refinancing in July, a ₹21,500-crore deal. The group has historically raised substantial debt against its stake in Tata Sons, making monetizing the holding crucial.

The urgency surrounding the discussions has increased since Natarajan Chandrasekaran, chairman of Tata Sons, announced his resignation in February. Noel Tata, chairman of Tata Trusts, which owns 66% of Tata Sons, may play a crucial role in resolving the longstanding issue. SP Group's latest bonds carry an 18.95% yield and mature in 36 months, with the first interest payment due in July 2028, adding to the urgency of finding a sustainable solution within months.