This has been a difficult year for Shapoor Mistry. After losing his father and younger brother within three months, he now faces a significant business challenge. As the heir to one of the world’s wealthiest families, Mistry has a lot at stake as he navigates this difficult time.
The Mistry family has a long and successful history in business, spanning 157 years and five generations. The family’s companies have been responsible for building some of Asia’s most iconic structures, including palaces, factories and stadiums. However, the majority of the family’s $29 billion fortune is currently tied up in a legal battle with India’s Tata Group.
Now Mistry, 57, will have to figure out how to resolve the dispute and free up cash as a weakening economy and rising interest rates rattle his Shapoorji Pallonji Group, which just emerged from years of financial stress during the pandemic. He has met with lawyers and consultants, and people familiar with the discussions say they have offered to mediate when the time is right.
The Mistrys and Tatas have been close for almost a century, but they have recently fallen out. Both families belong to the Parsi Zoroastrian community.
The Mistry family’s wealth comes primarily from their 18% stake in Tata Sons Pvt., the main holding company of the $128 billion Tata conglomerate. However, due to the bad blood between the Mistrys and the Tatas, the Mistrys’ stake is not very liquid, making their fortune one of the most illiquid on the planet.
“The long-running dispute between Tata Sons and Shapoorji Pallonji Group has underlined the need for Indian companies to include specific clauses on acquisitions, mergers and sales,” said Kavil Ramachandran, a professor and senior advisor at the Thomas Schmidheiny Centre for Family Enterprise of the Indian School of Business in Hyderabad. He added that he expects some senior members of the Parsi community to help initiate a mediation process between the two families at some point.
The representatives for Shapoor Mistry did not want to make any comments for this story.
The Mistry family’s wealth is largely tied to the Tata conglomerate, with about 90% of their assets coming from the company.
Pallonji Mistry, who passed away in June, was the head of the SP Group. The SP Group started out as a construction company back in 1865, but has since expanded into other areas such as water, energy, and financial services. Some of the most well-known structures that the conglomerate has built include the Reserve Bank of India buildings and the Tower wing of the Taj Mahal Palace hotel in Mumbai.
The Mistrys and Tatas have a long history dating back to 1927, when they first started working together on common business interests. The close-knit community of Iranians who had fled religious persecution centuries ago formed a strong bond between the two families, and they have continued to work together over the years. SP Group has helped build some of Tata Group’s automobile factories and steel mills, and the Mistrys have gradually increased their stake in Tata Sons by buying shares from Tata family members and through a rights issue. They currently hold 18% of the company.
The symbiotic relationship between the Mistry brothers was expected to get a boost when Cyrus was chosen in 2012 as chairman of Tata Sons, succeeding Ratan Tata. Cyrus sought to aggressively reduce the group’s debt, threatening in the process to undo the legacy of the conglomerate’s patriarch. That eventually led to a boardroom coup less than four years later, resulting in Cyrus’s shock ouster.
Then came a courtroom battle between the two business families that Tata Group ultimately won last year. Meanwhile, Tata Sons changed its status to become a private firm in 2017, which restricted the Mistrys’ ability to sell its stake to other investors.
The timing couldn’t have been worse for India’s SP Group. In 2020, the nation’s hard Covid lockdowns unleashed a massive economic disruption that created a cash crunch at many companies, including those part of the SP Group. The conglomerate tried to pledge part of its Tata Sons holding to repay maturing debt, but the nation’s top court barred it from doing so. Tata Sons offered to buy it out but the two sides couldn’t agree on valuation, leading to a deadlock. The Mistrys then had to resort to asset sales and bond repayment holidays from lenders to stave off defaults.
Nirmalya Kumar, professor at Singapore Management University’s Lee Kong Chian business school and a former Tata Sons senior executive, said that the feud between the Tatas and Shapoor could be resolved if Shapoor was reasonable. However, he added that any resolution would require the Tata Group to compromise.
Shapoor Mistry studied economics in London before joining the family business in 1992. He took over as chairman from his father two decades later and is credited with refocusing the group’s attention on real estate development rather than construction contracting. His son Pallon and daughter Tanya joined the business in 2019.
Cyrus was running the family’s investment company when he died in a September car crash at the age of 54. While his widow and two sons will inherit his wealth, succession arrangements have not been announced.
Pallonji Mistry’s two daughters, Laila and Aloo, will inherit his stake in the family business. However, it is not clear how much of the business they will each inherit. Aloo is married to Noel Tata, the half-brother of Ratan Tata, who is now the chairman emeritus of Tata Sons.
SP Group has repaid $1.5 billion to lenders and exited a debt recast program earlier this year, marking a major milestone in its economic recovery. However, rising interest rates and risks of a global recession are posing new threats.
Ramachandran said that the Mistry family will need some time to find a solution.
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