Shapoorji Pallonji (SP Group) Group, an Indian conglomerate, is going to seek a $1.6 billion private credit line. Some speculate that the Group may pledge some of its Tata Sons shares for this purpose. The discussions are centred on a three-year term with a double-digit interest rate.
Earlier sales of Shapoorji Pallonji Group.Â
Earlier last month, it was reported that Shapoorji Pallonji Group was looking for methods to free up cash as interest rates rise. It is considering asset sales, including a majority position in its main engineering business, to raise almost $2 billion.
Last September, Shapoorji Pallonji Group sold most of its Eureka Forbes consumer durables company to US-based private equity fund Advent International for Rs 4,400 crore. The proceeds from the transaction are expected to help the 156-year-old Group reduce its debt and focus on its core construction and engineering business, Afcons.
Meanwhile, it was reported earlier last month that Shapoorji Pallonji Group has already given over 9% of its 18.37% interest in Tata Sons.
The person organising the event.
The private credit offer is being organised by Deutsche Bank AG and Standard Chartered Plc, with conversations also taking place with Ontario Municipal Employees Retirement System, Varde Partners LP, Cerberus Capital Management LP, and Farallon Capital Management LLC, according to the sources. A portion of the procedure will be utilised to refinance outstanding debts.
Why is Shapoorji Pallonji Group selling its stakes?
A local rating agency downgraded the debt of Shapoorji Pallonji Group, the single-largest stakeholder in Tata Sons, earlier this month. As a result, Shapoorji Pallonji and Company Private Limited’s (SPCPL) Rs 19,600-crore debt across several instruments has been reduced to BBB+/A2 from A- (with a stable outlook)/A2+ and placed on rating watch with developing implications.
The rating agency stated that the delay in acquiring the required working capital restrictions had hampered the engineering, procurement, and construction (EPC) activities in FY23, resulting in moderate profitability and muted debt coverage measures of Shapoorji Pallonji Group.
Its line of credit was restricted in March 2022 as part of the One Time Restructuring (OTR) plan, limiting order execution in FY23, it said, adding that “timely approval of adequate working capital limits is critical to support the growth in core operations in the medium term.”
The ‘Watch with Developing Implications’ outlook is influenced by its business restructuring plan, according to the agency, which added that it had been given the understanding that the guiding principle is to have SPCPL operating only as the holding company for the construction business, while real estate and other business verticals will be cut out under separate entities, which will also be owned directly / indirectly by promoters.
Founded in 1865, the SP Group built luxury hotels, stadiums, palaces and industries throughout Asia, including the RBI building and the distinctive Tower Wing of the renowned Mumbai Taj Mahal Palace Hotel. According to their website, Afcons holds expertise in engineering and construction, including marine infrastructure, tunnels, bridges, and roads. The SP Group has projects in over 25 countries and is extending its presence in Asia, Africa, and the Middle East.
Tata Sons is the primary investment holding company and promoter of Tata Firms. Philanthropic trusts own 66% of Tata Sons’ equity share capital, which supports education, health, livelihood generation, and art & culture.
The feud between Shapoorji Pallonji Group and Tata Sons.
Cyrus Mistry was dismissed as Tata Sons Chairman more than six years ago, sparking a spat between the Shapoorji Pallonji family and the steel-to-salt conglomerate. The Shapoorji Pallonji Group has been involved with Tata since 1935 when it acquired a 12.5% interest in the company. Now, over nine decades later, the corporation is going to pledge a portion of its Tata Sons shares to raise $1.6 billion.
Disclosure.
To increase operating cash flows, the company has recently developed parallel structures for its real estate and infrastructure businesses under its present holding entities. The company had close ties with the Tata Group, but relations soured after the late Cyrus Mistry was ousted as chairperson of Tata Sons in 2016. The two parties engaged in a protracted legal battle, which ended in favour of the Tata Group. Let’s see if their efforts to sell assets worth millions of dollars can help the SP kingdom develop in these competitive times!
Proofread & Published By Naveenika Chauhan
