Mumbai: The Shapoorji Pallonji Group has offered a security cover exceeding six times the loan value of Rs 15,000 crore it will obtain from state-owned Power Finance Corporation. The group, helmed by Shapoor Mistry, has provided land parcels in Mumbai and other places, and a portion of Tata Sons shares owned by the promoters, as collateral against the loan amount sanctioned by the PFC board on June 14. The Rs 15,000-crore loan will be used to refinance existing liabilities of promoter entities as well as to retire debts of group operating companies.
“The cash flows from the real estate franchise will ensure a full repayment of the loan over the tenor (of three years),” said SP Group director (real estate) Venkatesh Gopalakrishnan. At the promoter level, the debt is around Rs 25,000 crore. PFC will have a lien on the incomes of Porteast — a special vehicle purpose created to obtain the loan — and Sterling Investments — which owns 9% in Tata Sons — thereby gaining access to cash flows from the real estate franchise and dividends from Tata Sons.
In case of a default, which the SP Group hasn’t done so far, govt through PFC will have a claim over Tata Sons shares. However, Tata Sons shares are not transferable to third parties without the permission of the company as its articles of association prohibit such a move but can be pledged to raise money. In the past too, the SP Group had offered Tata Sons shares (Mistry family holds 18.
4% in the holding company of the Tata Group) as collateral to secure loans from financial institutions. The over 160-year-old SP Group has been servicing its liabilities from its cash flows and proceeds from asset sales. It has sold its data centre construction business, port facility, among others, as part of its monetisation efforts to pare debt.
It is in the midst of taking one of its companies, Afcons Infrastructure, public. In March 2024, Afcons had filed IPO documents to raise Rs 7,000 crore. The group’s real estate franchise plans to develop some of the land parcels it owns in major cities.
The Rs 15,000 crore PFC loan gives SP Group the time to implement its ongoing real estate projects as well as to pare debt. PFC, the largest NBFC in the country and the most profitable, has sanctioned about Rs 82,000 crore to the infrastructure sector as of March 31, 2024. SP Group has been working with PFC over the last nine months to craft a “unique proposal that has a twin security structure leveraging the strength of our large real estate franchise, as well as a portion of the Tata Sons shares owned by the Mistry family.
This provides a security value in excess of six times of the loan value,” said Gopalakrishnan, adding that “The entire proposal has been validated by reputed third party consultants.”.
