InvestorQ : Why did the Mistry family decide so suddenly to exit their 18.4% stake in Tata Sons?
vaishnavi mhatre made post

Why did the Mistry family decide so suddenly to exit their 18.4% stake in Tata Sons?

Answer
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vidhya Laxmi answered.
4 weeks ago


It looks like the Mistry family may finally exit Tata Sons for good after 70 years although there is normally many a slip between the cup and the lip. But, if the initial indications are anything to go by, Mistry family may opt to fully exit their holdings in the Tata group.

To understand why they are exiting, one needs to go back to October 2016 when Cyrus Mistry was fired from Tata Sons. Since then, they have been fighting a pitched legal battle. Tatas have accused Cyrus Mistry of mismanaging Tata Sons and Mistry accused Tatas of destroying shareholder value.

The big trigger for the final fallout came when the Mistry group faced a liquidity crisis on account of COVID-19, which deeply impacted their construction business. Fearing loss of control, Tatas blocked the Mistry family plan to pledge Tata Sons shares with an SC order.

While Mistry family has argued that pledge was not a sale, Tatas fear that if the Mistry family defaults on the loan, then it would bring in an outside shareholder into Tata Sons. It could also hinder the right of first refusal or ROFR; which the Tatas enjoy currently.

With SC granting a stay, Mistry family had only two choices. It was either a prolonged legal battle or a total exit. Pallonji announced that continuing the relationship was not possible in the middle of so much mistrust and ill-will. The relationship will be closed soon.