By Dipika Lalwani and Saikat Das
Shapoorji Pallonji Group, the second-largest shareholder of Tata Sons Pvt., is seeking additional funds to meet a ₹3,500 crore ($365 million) debt payment even as prospects of monetizing its stake in India’s largest conglomerate buoy investors.
The fate of SP Group is closely tied to a dramatic battle within the Tata Group over whether to pursue an initial public offering for the conglomerate’s parent company, Tata Sons.
As it waits for greater clarity, SP Group is in talks with lenders to exercise a so-called greenshoe option on an existing ₹21,350 crore facility that would allow it to raise an additional ₹3,500 crore, according to people familiar with the matter.
Deutsche Bank AG, which underwrote the July financing, is set to provide bulk of the ₹3,500 crore, the people said. They asked not to be identified discussing private negotiations. SP Group did not respond to a request for comment while Deutsche Bank declined to comment.
The engineering and construction company on Monday sought to extend the due date of the ₹3,500 crore payment, which is owed by its financing arm Porteast Investment, by a month to the end of October, the people said. The company is likely to offer a slightly lower yield than the July borrowing because secondary market rates for SP Group have improved, they said.
Debt-laden SP Group may continue to face repayment pressure until it can unlock the value of its roughly 18% stake in Tata Sons. The group already secured extensions on other debt obligations this year, including bonds sold by its subsidiary Goswami Infratech, which have now been repaid, and a waiver to allow Porteast’s loan-to-value ratio to reach 40%.
Porteast is also seeking to extend that 40% loan-to-value limit, which expires Sept. 30, by another six months, the people said. Porteast raised $3.4 billion through zero-coupon bonds last year, backed partly by SP Group’s stake in Tata Sons. Its previous loan-to-value limit was 34%.
Spillover Effects
SP Group raised the initial ₹21,350 crore facility in July through local currency bonds issued by Eqyizen Investment Pvt. and a separate dollar bond sold by another unit called Mercury Finance Co. Part of that money was meant to help service Porteast’s bonds, but the funds were used to repay Goswami bonds and debt at Shapoorji’s other units, including Simar Port, the people said.
SP Group’s predicament is one of the spillover effects of the power struggle between two prominent Tata Sons executives, Noel Tata and Natarajan Chandrasekaran, over the company’s future. Noel has strongly opposed a plan by Chandrasekaran and the board to pursue an IPO, arguing that the business should stay private for as long as possible.
SP Group said last week it was ready to work with Tata Sons on a potential listing, saying the move could become a bridge for reconciliation between the country’s oldest business families. Noel also presented a separate SP proposal to monetize part of the stake through a share buyout that would generate at least ₹25,000 crore ($2.6 billion) for the construction giant.
Until either of option happens, SP Group will need to keep raising funds, refinance debt or seek extensions to meet upcoming payments. The 160-year-old firm has relied on costlier private credit and sought multiple extensions from bondholders after running into cash-flow pressures after the pandemic, when it piled on large amounts of debt. The strain also prompted the group to list its units and sell assets.
