InvestorQ : Can you explain why the Tatas and Mistry are yet not been able to come to a resolution for their battle when Mistry has decided to exit anyways?
Arti Chavan made post

Can you explain why the Tatas and Mistry are yet not been able to come to a resolution for their battle when Mistry has decided to exit anyways?

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Rutuja Nigam answered.
5 months ago
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The solution does not look too simple because first they have not been able to agree on the valuation. It is only after than the modus operandi of the parting of ways will actually be worked. They first need to come close to each on the valuation of the 18.4% stake.

Let us look at the valuation part of the dispute first. The difference or gap in perspective of valuation is too huge. This pertains to the 18.4% stake held by the Pallonji Mistry family in Tata Sons. This is the stake that has been the bone of contention.

On the one hand, the Mistry family has pegged the value of that stake at $24 billion. On the other hand, the Tatas have assigned a value of just $11 billion to that stake. One can bridge smaller gaps but this is clearly too large a gap to be amicably filled by both parties.

Why is such a huge gap arising? It has to do with the valuation of the brand of the Tatas implicit in the market cap. The Mistry family is demanding a share of the brand value of the group, which the Tatas are unwilling to pay. The Tatas are of the view that the Mistry stake was an investment and the Tata Brand belongs only to the Tata trusts.

Then there is the issue of modus operandi. For example, after the Mistry family agreed to sell its stake in Tata Sons, the big question had boiled down to valuations. Mistry had proposed a non-cash deal to the Tatas, under which Tatas will transfer equivalent value of Tata group shares to Mistry family against their 18.4% stake in Tata Sons.

Last week the Tata counsel, Harish Salve, rejected the proposal saying it will not tantamount to severance, which was the subject matter anyway. The idea was to plan an exit for the Mistry family and hence their continued role in the Tata group was ruled out. Tatas saw Mistry as a minority owner of Tata group companies as a risk. Clearly that has to change.

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