The Shapoorji Pallonji (SP) group will have to look for alternative ways to raise funds: sell its stake in the publicly traded subsidiary Sterling and Wilson, offer plots of land across India, or restructure project-level debt, among its options, after Tatas. upset their plans to the actions of Tata Sons.
The SP group defaulted on a Rs 500 million loan taken from its publicly traded subsidiary Sterling & Wilson in June and may opt for a debt consolidation as it meets all the criteria as per the recommendations made by the committee of KV Kamath last week.
The group is working on an alternative after Tatas moved the Supreme Court against its plan to raise funds worth Rs 3,750 crore from Brookfield, the Canadian financial giant, pledging part of its shares in Tata Sons.
Tata Sons moved the court on September 5, the day after the SP group signed an agreement with Brookfield, the SP group said. The Mistry family owns an 18.5% stake in Tata Sons, while the remainder is owned by the Tata Trusts and Tata group companies. The Tatas have the right of first refusal (RoFR) over the Mistry family’s shares, arguing that they cannot pledge TSL shares without their approval.
The bankers said that since the Brookfield deal will now be litigated, the SP group would have to consider selling assets. The SP group’s stake in S&W is worth Rs 2.2 billion on Friday and the group is seeking buyers for this stake, the bankers said.
The group’s flagship, Shapoorji Pallonji & Co Pvt Ltd, had reported debt of Rs 9,284 crore as of February 2020 independently. On a consolidated level, external debt was Rs 33,407 million as of March 31, 2019 compared to Rs 25,692 million as of March 31, 2018. Its figures for the March 2020 fiscal close were not available. The flagship had 1 billion rupees in cash on its books as of February this year.
In addition, to de-leverage SPCPL and its group companies, the Mistry family had planned to inject about $ 1 billion into the flagship company during the June quarter.
According to Cherag Balsara, a business law expert, the Tata group’s motion before the Supreme Court will affect the SP group’s plans to raise funds. “Given the value of SP’s stake in excess of Rs 100,000 crore in Tata Sons, I doubt that Tata Sons has the financial capacity to squeeze SP Group to a reasonable value,” he said.
“This measure by Tata is apparently aimed at blocking the SP Group’s fundraising efforts during the COVID pandemic, in an attempt to harm the company. This measure amounts to the oppression of minority shareholders and could expose the board of directors of Tata Sons to a possible claim for damages from Grupo SP, ”said Balsara.
Global financial powerhouse KKR acquired Shapoorji Pallonji Infrastructure Capital’s five solar power operating assets for Rs 1,554 crore in April. The SP group used the funds to reduce its debt in construction, but they were not enough to meet its other commitments considering that the entire sector came to a complete halt after the government blocked the country to control the spread of the coronavirus.
.
