Cyrus Mistry, the scion of Shapoorji Pallonji Group, at an event in Kolkata on August 24, 2016. Photo: AFP

Salt-to-software conglomerate Tata Group, which is locked in a dispute with Shapoorji Pallonji Group, has offered to buy out the latter’s 18% stake in Tata Sons – the principal holding company and promoter of Tata firms.

The Supreme Court on Tuesday barred Shapoorji Pallonji from pledging or selling any Tata shares until October 28, the next hearing of the case. Shapoorji Pallonji has told the court that it would exit from Tata Sons provided it gets an early, fair, equitable solution.

With this, the 70-year-old relationship between two of India’s biggest groups will come to an end. The two have been at loggerheads after Cyrus Mistry, the scion of Shapoorji Pallonji Group, was removed as Tata Sons chairman in 2016.

Shapoorji Pallonji Group has been pledging some of its stake in Tata Sons to service its debt after its core businesses – real estate and infrastructure – took a hit because of the ongoing Covid-19 pandemic. The embattled group has reportedly raised 50 billion rupees (US$680 million) by way of debentures against pledges in favor of Axis Trustee Services and IDBI Trusteeship Services. It was also reported that it was planning to pledge shares in favor of Canadian private equity firm Brookefield Asset Management.

On September 5, Tata had moved an application before the Supreme Court to restrain Shapoorji Pallonji from raising capital by pledging their shares in Tata Sons. It had argued that any pledge will amount to a transfer of shares, and under the company’s Articles of Association, the board of Tata Sons has the first right to buy the shares at fair market value.

The offer to buy Shapoorji Pallonji’s stake will also help prevent Tata Sons’ shares from being pledged to unfriendly investors.

Shapoorji Pallonji had recently informed the stock exchange that it has failed to repay dues of over 10 billion rupees to group company Sterling and Wilson Private Limited.

Real estate and infrastructure have been among the sectors hit hardest by the nationwide lockdown to contain the spread of coronavirus. There was a steep fall in demand and projects were stalled as transport curbs hit the supply chains. Large-scale movement of migrant workers to their home towns due to lack of work and wages compounded their woes.