SP Group to raise up to Rs 15,000 crore against Tata Sons shares

Ares SSG, Farallon offer loans at 24% per annum after long-drawn talks

After a long-drawn negotiation, global financial firms Ares SSG Capital Management and Farallon Capital Management have finalised plans to offer up to Rs 15,000 crore in loans to Shapoorji Pallonji Group against Tata Sons Private (TSPL) shares. SP Group owns an 18.4 per cent stake in the holding company of the Tata group; the rest is owned by Tata Trusts, other Tata group entities, and small shareholders.
 

SP Group will use the money to repay Indian banks as the March-end deadline to loan repayment draws nearer. The billionaire brothers — Shapoor Mistry and Cyrus Mistry — own equal stakes in SP Group companies and saw a massive rise in their wealth after the sharp rise in the Tata group’s listed companies. A banking source said the interest rate on these loans is pegged at 24 per cent per annum.
 

A spokesperson for SP Group did not comment on the fundraise.
 

The pledging of Tata Sons Private shares was a major bone of contention between SP Group and the Tata group.
 

SP Group wanted to raise funds by pledging shares but the Tata group objected to it and moved the Supreme Court in September 2020 to block the pledge citing its articles of association. Tata Sons also became a private limited company so that any potential share transfer becomes a cumbersome process — without its approval.
 

In March last year, the Supreme Court had decided in favour of Tata Sons in the dispute related to Mistry’s removal as chairman of Tata Sons by the board in October 2016 but did not stay the share pledge by SP Group, which

was facing a financial crisis due to the Covid pandemic.
 

After the real estate industry faced a slowdown, SP Group’s flagship, Shapoorji Pallonji and Company Private (SPCPL), had applied for a one-time restructuring (OTR) of its debt on March 31 last year. As part of the OTR implementation, SPCPL promised to sell assets to repay debt and improve its financial ratios. Since then, the group sold its 40 per cent stake in its renewable power firm, Sterling and Wilson Solar, to Reliance Industries and in Eureka Forbes, a consumer durable company. The group had a total debt of Rs 25,000 crore when it applied for OTR.
 

As against outstanding standalone debt of Rs 12,500 crore as on March 31, 2021, SPCPL targeted a debt reduction by Rs 10,000 crore in the financial year ending this month. The group used the proceeds of Rs 3,000 crore from Eureka Forces to repay its debt to banks. It also paid its outstanding debt to Sterling and Wilson Solar as part of the debt reduction plans. It also sold its real estate worth Rs 1,000 crore to repay inter-corporate debentures.
 

The Mistrys also infused Rs 3,450 crore into the company to repay OTR debt in the first half of the current financial year. With these asset sales, the group managed to meet the threshold ratios to comply with the Kamath Committee’s ratios stipulated under the OTR framework for construction companies.
 

In August 2021, the RBI had allowed a further extension of the timeline for achievement of the ratios due to the second wave of the Covid-19 pandemic. This move provided a cushion to SPCPL, in case there was any delay in the asset monetisation process. With the March-end deadline to repay group loans, it raised funds from the foreign companies.