Cyrus Mistry family allowed to sell Tata Sons stake as per choice by NCLAT

As an implication of NCLAT's order converting Tata Sons back to a public limited company, the Mistry family is now completely free to sell or retain their minority shareholding as per their choice in the holding firm of the conglomerate.

After the Registrar of Companies (RoC) lists Tata Sons as a public limited company, the Mistry family would be able to sell or retain their minority shareholding in Tata Sons as per their choice.

According to sources, the family might exercise this option to off-load some of their stake to save their entity, Sterling Wilson.

The family owns over 18 per cent stake in Tata Sons.

On Wednesday, the tribunal, among other things, held the conversion of Tata Sons from a public company to private as illegal and asked the Registrar of Companies to again recognise the company as public.

The company had in 2017 decided to convert into a private company whereby the shareholders would not be able to trade their shares, which was vehemently opposed by Cyrus Mistry and his family who have over 18 per cent stake in Tata Sons.

A private limited company is a business entity that is held by private owners. This type of entity limits the owners` liability to their ownership stake, and restricts shareholders from freely trading shares.

This restricted the minority shareholders of Tata Sons like the Mistry family to off-load their stakes to buyers of their choice.

Further, the NCLAT on Wednesday restored Cyrus Mistry as the Executive Chairman of Tata Sons, three-years after he was ousted from the coveted position.

Giving its order on the matter, a two-judge bench headed by S.J. Mukhopadhaya said that the Mistry`s restoration order will be operational after four weeks and the Tata Group can appeal in the Supreme Court during this period.

Sources say that the judgement gives the family an option to sell their stake in Tata Sons to save Sterling Wilson Solar. The family is expected to exercise this option, sources said.

The development comes as the Shapoorji Pallonji Group, the promoter of Sterling Wilson Solar, is exploring several options, including making Eureka Forbes public or selling stake in its engineering company Forbes to pay back the inter-company loans the group had taken from the solar company, sources had said earlier.

The promoters of Sterling Wilson Solar currently owe the company Rs 2,341 crore, which includes a principal amount of Rs 2,085 crore and interest of Rs 256 crore, said a recent regulatory filing by the company. On August 20, when it was listed on the exchanges, the dues stood at Rs 2,563 crore.

According to sources close to Sterling Wilson and its promoters, the construction major Shapoorji Pallonji is considering ways to raise funds and pay back the loans. The promoters currently hold 77.22 per cent stake in the company, as per BSE data.

As per the promoters of Sterling Wilson Solar, they have not been able to pay back the dues because of the deteriorating credit market along with lesser than expected realisation from its initial public offering (IPO).

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In a regulatory filing last week, the company had said that its promoters had requested its board of directors to consider a revised repayment schedule for the balance outstanding amount which was reduced to Rs 2,341 crore.

It realised Rs 2,850 crore from the IPO before expenses and taxes compared to the anticipated realisation of Rs 4,500 crore.

Several investors of the company, however, rue the fact that the promoters could pay back the due as the realisation of Rs 2,850 crore was still higher than their balance due to the company.

Analysts tracking Sterling Wilson are of the view that its IPO did not take off well as it was not planned well.

Financially, the company is in a sound shape. In the quarter ended September, it had reported a net profit of Rs 58.36 crore, against Rs 79.4 crore during the same period last year. As of September 30, its cash balance stood at Rs 410.62 crore.