Tata-SP Group share swap talks target 18.4% stake
Noel Tata's reps explore Tata Power share swap for SP Group's 18.4% Tata Sons stake, alongside buyout or external sale options, as 18.95% bonds face first payout by July 2028.
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The Tata Group is in discussions with its largest minority shareholder, the Shapoorji Pallonji Group, about ways to unlock liquidity, including a potential share swap involving listed Tata entities, according to people familiar with the matter.
Representatives of Noel Tata, the chairman of Tata Trusts and the Tata family patriarch, are exploring a structure where SP Group receives shares of companies such as Tata Power Co. in exchange for part or all of its 18.4% stake in privately-held Tata Sons Pvt., the people said, asking not to be identified because the discussions are private.
Two other options are also on the table: a direct buyout of the construction giant's stake by Tata Sons, financed by overseas banks, or a sale to an external investor, preferably a global one, the people added.
A breakthrough would be a windfall for investors in SP Group's debt, which include Cerberus Capital Management LP, Davidson Kempner Capital Management and Farallon Capital Management. For the Tatas, a resolution could ease regulatory pressure that has built since central bank rules revived requirements for the holding company to list on exchanges.
Noel Tata chairs Tata Trusts, a group of charities that own 66% of Tata Sons. Natarajan Chandrasekaran's announcement this month that he will step down as Tata Sons chairman in February puts Noel in the driver's seat to push a settlement. Noel also has a direct familial tie: he is married to Aloo Mistry, the sister of SP Group Chairman Shapoor Mistry.
Representatives of Tata Sons and Shapoorji Pallonji Group did not offer immediate comment.
SP Group closed one of the largest private credit transactions in India in July, with investors betting the conglomerate can eventually monetize its Tata Sons stake and unlock billions of rupees in liquidity.
There is no certainty the talks will produce a deal, and the structure may change as negotiations proceed, the people said. The Economic Times reported last month on the share swap as a possible route.
A major hurdle is agreeing on a valuation for Tata Sons, which controls the bulk of the salt-to-software conglomerate and holds large unlisted businesses such as Air India Ltd. and iPhone maker Tata Electronics Pvt. under its umbrella.
Both sides are evaluating legal aspects of all options under discussion, as well as potential regulatory issues around the share swap since it would involve listed Tata entities, the people said.
SP Group is periodically updating its stakeholders on the talks, while advisers are examining legal implications of the various structures, the people added.
A resolution needs to happen within 18 months, as that is the timeline for SP Group's recently closed bond issue to make its first payout. The bonds, sold by Eqyizen Investment Private, carry a coupon of 18.95%, mature in 36 months, and have their first interest payment due in July 2028, according to the bond term sheet seen by Bloomberg.
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