InvestorQ : Why is there such a huge gap between what Mistry family is valuing their stake and what the Tatas are valuing?
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Why is there such a huge gap between what Mistry family is valuing their stake and what the Tatas are valuing?

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rhea Babu answered.
3 months ago
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The latest arena of the war between the Tatas and the Mistry family is over the valuation of the 18.4% stake that Mistry family owns in Tata Sons. While a small difference in valuation is understandable, the current gap appears to be too huge to reconcile. In a nutshell, the valuation gap between the two estimates is as high as $13 billion or Rs.96,400 crore.

As per latest market estimates, there appears to be a difference of $13 billion in the valuation of SP Group stake in Tata Sons. For example, the Tatas have valued the 18.4% stake owned by Mistry family in Tata Sons at $11 billion, while the SP Group has pegged its own estimate at $24 billion. Why does such a big gap arise?

Before we get into why this gap is arising, it is important to know that SP Group had agreed to swap shares in Tata Group companies instead of asking for cash payment. But the core of this is the valuation that is arrived at for the swap. With such a gap in valuation opinions, there is unlikely to be a deal without a prolonged court battle.

Why this gap. There could 3 reasons. Firstly, Mistry is demanding compensation for the brand which the Tatas would not be keen. Secondly, there could be differences on sharing of debt and liabilities. Lastly, Tatas are of the view that Mistry family has recovered its small initial investment in Tata Sons hundreds of times over via dividends and real estate orders. So, it is time for a more rational payback.

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