Power Finance Corp approves Rs 15,000 cr loan to Shapoorji Pallonji group

The board of state-run Power Finance Corporation (PFC) has approved a Rs 15,000 crore loan to the Shapoorji Pallonji (SP) group companies, signifying a significant financial boost for the Mistry family, who are the promoters of the group and hold an 18.37 per cent stake in Tata Sons, according to a report by The Economic Times (ET). The loan is intended to assist in settling promoter debts and fulfilling financial obligations owed by their operational firms to creditors.

The loan is set to be secured against the cash flows of SP group's real estate business and the Mistry family's shares in Tata Sons. The tenor of the loan is expected to be four years, with an additional component to cover interest costs for the first two years. A formal sanction letter is anticipated, which may include specific conditions.

 

In May, MoneyControl reported that SP Group initiated discussions with PFC to secure up to $1.2 billion for refinancing part of the Rs 20,000 crore debt maturing at the end of the month.

Earlier in February, the Mistry family had also approached Deutsche Bank and PFC for a loan to assist their promoter companies in paying off high-interest bonds sold to global credit funds. These bonds, due for redemption this month and collateralised by Tata Sons shares, have been rolled over until September with the bondholders' consent.

The PFC loan is expected to be disbursed to two Special Purpose Vehicles (SPVs) created by the Mistry family. These SPVs will utilise the loan proceeds to pay off bondholders. The SPVs will house the family's stake in the real estate business, with PFC having a lien on the SPVs' bank accounts, thereby granting access to dividends and potential proceeds from any stake sales.

The Mistry family's personal debts, totalling around $3 billion, have significantly strained their finances, ET reported. Successfully repaying these debts could enhance the operational flexibility of their companies, allowing them to reinvest profits into business growth rather than using them to pay dividends to shareholders.

Historically, Tata Sons shares have been accepted as collateral by various lenders, including banks, to secure loans for the SP group. PFC has secured a legal opinion affirming the usability of unlisted shares as security for loans.

The primary operating companies managed by the Mistry family, such as Shapoorji Pallonji and Company Limited and Afcons, are key players in the construction sector. Afcons Infrastructure Ltd (AIL), the flagship infrastructure engineering and construction company of the Shapoorji Pallonji Group, filed draft papers with market regulator Sebi in March to raise Rs 7,000 crore through an initial public offering (IPO).

On March 26, SP Group had also announced an agreement with Adani Ports and Special Economic Zone to sell a 95 per cent stake in Gopalpur Port in Odisha for Rs 1,349 crore. This sale satisfies a critical clause of its loan agreement related to the disposal of Gopalpur within a stipulated timeframe.

PFC reported its highest annual consolidated profit of Rs 21,179 crore for the financial year 2023-24 (FY24), making it the largest and most profitable non-banking finance company group in India, according to a statement made by the power ministry in May.

In the fourth quarter of FY24, PFC reported a consolidated net profit of Rs 7,556 crore, marking an over 23 per cent year-on-year rise, mainly on the back of the expansion of the loan portfolio.