MUMBAI : Shapoorji Pallonji Group has raised ₹14,300 crore from a clutch of private credit investors and high-net-worth individuals, pledging its shares in Tata Sons Ltd as collateral, primarily to refinance its debt, two people familiar with the development said.
The group raised funds from private credit investors, including Cerberus Management, Davidson Kempner, and Varde Partners, and foreign banks such as Deutsche Bank, Standard Chartered, and Nomura Holdings.
There was significant subscription from high-net-worth individuals too because of the attractive yield, one of the people cited above said, requesting anonymity.
“The book was more than covered,” the person added.
The listed non-convertible debentures (NCDs) were raised fully in rupees and promised an enticing yield of 18.75%, presenting a very attractive but risky investment opportunity.
However, what gave investors comfort, perhaps, was the inclusion of highly secure assets as collateral, including the 9.2% stake in Tata Sons, the main holding company of the Tata group. Other assets pledged included shares in Afcons Infrastructure Ltd and several of the group’s ports businesses. The tenure of the NCD is around 2.5 years, they added.
“The facility has been structured such that two identified assets, namely Afcons Infrastructure Ltd and Gopalpur Ports Ltd, have been ring-fenced for the purpose of mandatory prepayment of the facility,” Mint quoted from a note in a 14 June report.
Some of the repayment is expected through the initial public offering of Afcons Infrastructure and the sale of its ports business.
The borrowing by the group comes as it seeks to meet its financial obligations, including repaying banks ₹4,400 crore, making a prepayment of around ₹3,250 crore in debt, and obtaining ₹3,000 crore working capital for its real estate and ports businesses.
The SP Group, which owns 18.37% of Tata Sons, has already pledged half of its stake owned by Sterling Investment Corp. Pvt. Ltd, an investment vehicle of the firm. A large portion of the funds raised today will go towards the repayment of this debt. Some of the capital raised will also be allocated for treasury investments, the people cited above added.
Deutsche Bank and Standard Chartered were arrangers to the bond sale.
Spokespeople for Standard Chartered and Nomura declined to comment.
“Volatile market environment and geopolitical uncertainty notwithstanding, some of the largest institutions and funds have oversubscribed to this deal. This is a clear indicator of the robustness of private credit as an alternative investment source,” Amrish Baliga, the managing director of Deutsche Bank India, said in an emailed statement.
A spokesperson for Shapoorji Pallonji and the other investors did not respond to requests for comment.
The group has made strenuous efforts to monetize assets to reduce its debt by close to $1.4 billion ( ₹12,500 crore) in the past two years. It sold some of its businesses, including Eureka Forbes, a majority stake in Sterling and Wilson Renewable Ltd, and paid back ₹12,500 crore last year as part of a one-time resolution deal without a haircut to its creditors.
This fundraising comes at a time Shapoor Mistry has experienced personal tragedies. In September last year, Mistry lost his younger brother, Cyrus, in a car accident after losing his father, Pallonji, in June last year.
The group is also in the middle of a major restructuring by creating two holding companies to house its diverse businesses, ranging from real estate and construction to oil and gas, to be overseen by children of brothers Shapoor and Cyrus Mistry, Mint reported last month.
Download The Mint News App to get Daily Market Updates & Live Business News.
Updated: 27 Jun 2023, 11:24 PM IST