Shapoorji Pallonji Group Secures $3.3 Billion in Debt
MUMBAI: The Shapoorji Pallonji Group is set to make headlines with its ambitious plan to raise $3.3 billion in India’s largest private debt arrangement in domestic currency. This significant funding initiative will see participation from 15 investors, including major private credit funds like Davidson Kempner Capital Management, Cerberus Capital Management, and Ares Management Corp. The funds are expected to be finalized by early April, marking a pivotal moment for the 160-year-old conglomerate.
Major Investors Join Forces
The funding will be primarily sourced from five private credit funds, which will contribute approximately 75% of the total amount, equating to around $2.5 billion. The remaining funds will come from other investors, including Farallon Capital Management and One Investment Management. This collaborative effort underscores the confidence investors have in the Shapoorji Pallonji Group, known for its iconic constructions in Mumbai, such as the Reserve Bank of India building.
The funds raised will be utilized to refinance existing debts linked to the promoters’ 18.4% stake in Tata Sons, the holding company of the $165 billion Tata Group. This strategic move aims to alleviate the financial pressures faced by the group, which has been grappling with significant debt levels.
Financial Strategy and Debt Management
The Shapoorji Pallonji Group, which currently holds a total debt of approximately Rs 55,000 to Rs 60,000 crore, is taking decisive steps to manage its financial obligations. Half of this debt is attributed to the Mistry family, while the other half is associated with the group’s operational real estate and construction companies. The new funding initiative will not only refinance the existing debt but also address the financial needs of the group’s operational entities.
The bonds issued as part of this funding will carry a high-teens interest rate and will have a maturity period of 3.5 years. They will be listed on the Bombay Stock Exchange (BSE), providing investors with a transparent platform for their investments. This move is expected to enhance the group’s liquidity and improve its overall financial health.
Challenges and Future Outlook
Despite the ambitious fundraising efforts, the Shapoorji Pallonji Group faces ongoing challenges. Last year, the group attempted to raise Rs 20,000 crore from Power Finance Corporation but was unsuccessful. The conglomerate has also experienced financial strain due to high-cost construction projects and working capital constraints exacerbated by the COVID-19 pandemic and the IL&FS crisis.
The current fundraising initiative follows a previous effort by Goswami Infratech, which secured $1.6 billion from a group of investors at an interest rate of 18.75%. The interest rate for the new bonds is expected to exceed this figure, reflecting the ongoing challenges in the financial landscape.
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