SP group flagship firm averts crisis

Pays ~3,000 crore dues to lenders

Shapoorji Pallonji & Co, the flagship firm of the Pallonji Mistry group, has crossed an important financial milestone by repaying/refinancing ~3,000 crore of bank dues as on March 31.

The dues were paid without pledging the group’s 18.5 per cent stake in Tata Sons, said a source close to the development. A private equity (PE) source said though the SP group wanted to offer Tata Sons shares as pledge, they were hesitant to take these shares as pledge because there could be potential litigation by the Tatas and lack of liquidity in the private limited firm’s shares.

The PES are also worried that the Tata group will invoke the right of first refusal and will not transfer at a later date, if need be, said a PE source. In order to make sure the flagship firm repays its loans, the company promoters, the Mistry family, infused ~870 crore into the company in the second half of FY20.

A source in SP group said the promoters had infused over ~2,500 crore over the past 18 months and there is a strong interest among global banks and institutions to lend against Tata Sons shares. The fund infusion in the flagship company includes ~1,900 crore from the proceeds of the Sterling & Wilson Solar’s initial public offering. “All our existing bankers have been supportive to us,” said a SP group official.

The official said the group, on a consolidated level, had a strong order book in excess of ~1.2 trillion as of March 2020 with multi-year revenue visibility. As of September last year, the flagship company SPCPL alone had an order book stood of ~37,813 crore.

The company also assured lenders that it would sell its land bank and solar, road and overseas assets to reduce its debt in the coming quarters. The group also has made investments in the real estate, electrical contracting, water purification, infrastructure development via JVS. Some of these investments will be monetised by way of stake sale of fresh PE investments in these companies.

As on September 30, 2019, the total external debt of the flagship firm on standalone basis stood was ~9,019 crore, which reduced the overall gearing ratio of Shapoorji Pallonji & Co below 2.5 times as on March 31, 2020. The firm also reduced its financial guarantees to ~2,428 crore as of September last year from ~2,943 crore as on March 31, 2019. This does not include debt covered in form of letter of comfort given by Shapoorji Pallonji & Co to its various subsidiaries/ associates/jvs and the principle outstanding, according to a statement by Care Ratings.

In order to make sure the flagship company repays its loans, the promoters infused ~870 cr into the firm in the second half of FY20