SP group seeks 2-year debt moratorium, interest converted to loan

Total group borrowings amount to over Rs 25,000 cr, flagship alone has Rs 23,500 cr of debt

The Shapoorji Pallonji Group has sought a two-year debt repayment moratorium  from its lenders as the real estate sector and its mainstay construction business is undergoing a slowdown due to the Corona pandemic. 

The group has asked lenders to extend principal repayments by two years as per the recommendations of the KV Kamath panel appointed by the RBI to help Corona-hit companies and regard outstanding interest as capitalised or converted to FITL-I (funded interest term loan). It also asked for interest on all the facilities till September 30, 2021 to be converted to FITL–II.  

The group flagship, Shapoorji Pallonji Corporation Pvt Ltd’s debt repayment obligations in fiscal 2021 are Rs 5,320 crore at the standalone level and Rs 10,000 crore at the consolidated level. Total group borrowings amount to more than Rs 25,000 crore while the flagship has Rs 23,500 crore of debt.

The group has promised to repay its debt in four equal quarterly instalments starting from June 30, 2022 and said it will sell its assets and investments, and use the ICD repayments from group firms to pare its debt in the meanwhile.

When contacted, a group spokesperson said the COVID-19 global pandemic has had a major impact on companies globally. SPCPL, the holding company of the SP Group has sought a One Time Resolution (OTR) of its obligations under the Covid relief framework regulations of the Reserve Bank of India.   ''The company applied for relief under the said provisions in late September.  The OTR was successfully invoked on 26th October 2020, by 100% of the company’s lenders.  release its unutilised non-fund-based limits and need based working capital to meet business requirements, and to meet the one-time debt recast ratio."

The group said lenders need to release its unutilised non-fund-based limits and need based working capital to meet business requirements, and to meet the one-time debt recast ratio.

A banking source said the company has a free cash balance of Rs 530 crore as on September 25, 2020 and its estimated cash flow from operations along with the existing cash balance will not be adequate to meet the high repayment obligations falling due over the next few quarters. 

The financial liquidity of SPCPL was impacted by the delay in promoter fund-raising on account of COVID-19 and the Supreme Court stay order on pledge of shares held in Tata Sons, which is likely to aggravate cash flow mismatches and thereby impact the liquidity position of the group companies. 

The group holds 18.4 per cent stake in Tata Sons, which it estimates at Rs 1.78 trillion, while the Tatas put it much lower, at Rs 80,000 crore. Lenders said once the SC gives its order on the Tata-Mistry dispute, then it will be easier for the SP group to raise funds.

In April last year, global financial powerhouse KKR had acquired Shapoorji Pallonji Infrastructure Capital’s five operational solar energy assets for Rs 1,554 crore.  The SP group used the funds to reduce its debt in its construction business.  But this was not enough to meet its other commitments considering the entire construction business came to a grinding halt after the lockdown announced by the government shut all constructions and sales fell to all time low. The group later tried to pledge its stake in Tata Sons but the Tata group moved the SC and stopped the fund raising deal.

Mistry’s  debt recast plan

• Extend principal repayments as per KV Kamath panel report

• Outstanding interest capitalised or converted to FITL-I based on treatment given by the particular lender 

• Convert interest on all the facilities till September 30, 2021 as FITL –II;

• Will repay in 4 equal quarterly installments starting from June 30, 2022;

• Will monetise assets/ investments to repay debt