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

The Tata Group is exploring several options with the Shapoorji Pallonji (SP) Group to unlock the value of the latter's 18.4% holding in Tata Sons, as the construction conglomerate looks to raise funds to service expensive debt, according to a report by Bloomberg citing people familiar with the discussions.

As per the report, representatives of Noel Tata, chairman of Tata Trusts, are examining a possible arrangement under which SP Group could receive shares in listed Tata companies, potentially including Tata Power, in exchange for part or all of its stake in the privately held Tata Sons.

Share Swap, Buyout Among Options

Two other structures are reportedly under consideration. Tata Sons could directly purchase SP Group's holding using financing from overseas banks, or the stake could be sold to an outside investor, preferably an international buyer.

There is no guarantee that negotiations will result in an agreement, and the proposed transaction structure could change. Valuing Tata Sons is expected to be a major challenge because the holding company controls several significant businesses and assets across the Tata conglomerate, including unlisted companies such as Air India and Tata Electronics.

Both groups are also examining the legal and regulatory implications of the alternatives. A share swap involving listed Tata companies could require additional regulatory scrutiny.

SP Group Faces Debt Repayment Pressure

A settlement would provide SP Group with potentially significant liquidity and could benefit 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, with a ₹21,500-crore transaction in July. The group has historically raised substantial debt against its Tata Sons stake, making monetisation of the holding increasingly important.

The discussions have gained urgency following Natarajan Chandrasekaran's decision to step down as Tata Sons chairman in February. Noel Tata, who chairs Tata Trusts—which owns 66% of Tata Sons—could play a key role in resolving the long-running issue.

SP Group's latest bonds carry a 18.95% yield and mature in 36 months. The first interest payment is scheduled for July 2028, creating pressure to find a sustainable solution within the coming months.