Tatas keeping a close eye on pledged shares
Tata Trusts and Tata Sons are said to be closely monitoring the Shapoorji Pallonji (SP) Group's bid to raise ₹20,000 crore from state-run institutions to refinance debt taken against stakes in the Tata Group holding company. The Mistry family-promoted SP Group holds an 18.37% stake in Tata Sons, all of which is pledged against loans. The Tata Trusts own a controlling 66% of the holding company.
The Tata Trusts and Tata Sons have been discussing the question of whether the institutions are aware that the Tata Sons Articles of Association, 57-61, regulate the transfer of shares in the event of a shareholder default, said people with knowledge of the matter. There can be no transfer of shares without board approvals, they said.
«Indian lenders and their credit committees would need to evaluate whether their inability to transfer or sell the security in a default situation represents an acceptable risk,» said one of the persons.
'No Question of Default'
«They also need to contemplate the possibility of getting embroiled in litigation with Tata Sons in order to be able to enforce the security,» the person said.
Another person said: «This is relevant for locally regulated institutions, whilst it might not have been so for foreign unregulated entities. A potential lender by virtue of being a regulated entity would need to get comfortable that such a loan is compliant with local regulations given the imperfect nature of the underlying security.»
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