Debt reduction and repayment have been a looming issue for the Shapoorji Pallonji (SP) Group for quite some years now. Recently, the SP Group received permission from the holders of non-convertible debentures (NCD) for the removal of certain restrictive covenants, according to MoneyControl. The move is likely to ease the path for the conglomerate to manage liquidity and help to refinance loans it received against shares of Tata Sons.
Additionally, the Shapoor Mistry-led conglomerate reportedly bagged “in-principle” approval from stock exchanges to amend NCDs.
Following the nod, the conglomerate has removed covenants that included terms that linked repayments to the bond holders to any refinancing or restructuring of loans of SP Group entity Sterling Investment loan.
SP Group’s Debt Trouble Mitigation Timeline
The Covid-19 pandemic halted construction activities across the country, severely impacting one of the core businesses of the 159-year-old conglomerate. SP Group’s debt stood around Rs 37,170 crore at the end of August 2020, according to Fortune India. It gave a financial jolt to the group, drying its resources.
Consequently, the group knocked on the Reserve Bank of India’s door to avail one-time resolution (OTR) in September 2020. To further raise funds, the conglomerate under the chairmanship of Pallonji Group, which is the largest public shareholder of Tata Sons, pledged 9.19 % of its stake in 2020. Following this, the group used the remaining 9.19 per cent as collateral in 2021 to raise a loan worth Rs 22,000 crore, which is due by March 2025.
The group’s decision to pledge Tata Sons shares became a bone of contention between the Tata Group and the Mistry family-led SP Group. The Tata Group reportedly opposed the move and contended that the failure to get the shares released would result in the transfer of ownership. Additionally, it further fractured the relationship, which had already become bitter after the removal of Cyrus Mistry as the Tata Group chairman in 2016.
The 159-year-old conglomerate has stretched itself since then to reduce debts. In 2021, the group sold a majority stake worth Rs 4,400 crore in its subsidiary Eureka Forbes to global private equity firm Advent International.
“This transaction also reflects our stated objective and strategy of significant de-leveraging and focusing on our core competencies and businesses,” said Jai Mavani, Executive Director, Shapoorji Pallonji and Company, in a press release on September 19, 2021.
In 2023, the group sold another key asset to lower its debts and continue its efforts to focus on its core capabilities. The conglomerate sold more than a 50 per cent controlling stake in PNP Maritime Services port worth Rs 270 crore to Sajjan Jindal-owned JSW Infrastructure. In June the same year, the group’s promoter entity Goswami Infratech raised Rs14,300 crore via zero-coupon non-convertible debentures at 18.75 per cent interest rate pledged against the shares of Tata Sons and Afcons Infrastructure.
Last year, Shapoor Mistry-led construction-to-real estate conglomerate sold 56 per cent stake in Gopalpur Port located in Odisha to billionaire Gautam Adani-led Adani Ports and Special Economic Zone Ltd.
In another big move in 2024, the conglomerate launched the initial public offering (IPO) for its infrastructure engineering and construction company, Afcons Infrastructure to raise Rs 5,430 crore to meet working capital requirements and repayment of debt.
The conglomerate is also eyeing to launch another IPO to make its real estate venture public, the Moneycontrol reported.
Despite its efforts to downsize debt, the SP Group’s credit rating has remained negative. The credit agency CareEdge maintained a ‘BBB-’ rating in its October 2024 estimates.
“SPCPL’s credit profile is expected to remain weak due to prolonged delays in achieving adequate funding tie-up to support its business operations in the near-to-medium term. Hence, the outlook continues to remain negative,” said CareEdge in a press release.
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