PFC board declines SP Group’s ₹20,000-crore loan proposal

Mumbai: State-run Power Finance Corporation (PFC) has decided not to go ahead with the ₹20,000-crore loan proposal to Shapoorji Pallonji Group (SP), PFC Chairman Parminder Chopra said on a call with analysts on Friday.

The board declined to give its nod nearly 10 months after discussions started, potentially derailing the SP group’s debt repayment plans.

In the call with analysts, Chopra clarified that the board was not keen on PFC taking a higher exposure to a new sector.

Also read | India’s Shapoorji Group Seeks Up to $2.4 Billion From Lenders

“We have done detailed due diligence. The board has decided that since it’s a new sector we may not take a high exposure. We have therefore decided not to go ahead with the sanction of loan,” he said.

A spokesperson for the SP Group, in response to Mint's queries, said, “We understand that the Board of PFC would not like to proceed with the proposal in its current form. We acknowledge that such structured credit proposals, which global investors are very familiar with, would have been pathbreaking for PFC. In this context, we can appreciate the concerns expressed by the Board of PFC in being the sole financier for such a large amount.”

Alternatives being explored

The spokesperson added that the group has started exploring alternative deal structures, taking into account PFC's feedback, including onboarding additional consortium lenders to take ahead this deal or alternatively consummate a similar deal with other pools of global capital.

In a media statement in August, the SP Group had said that it had received a formal sanction letter from PFC on 14 June. People aware of the matter had told Mint at the time that the sanction letter came with conditions and clarifications were sought.

SP Group added in the statement that the cash flows from the real estate franchise would ensure full repayment of the loan over the tenor and that the proposal had been validated by “reputed third party consultants”.

Also read |  PFC independent directors raise concerns over ₹20,000-cr loan plan for SP Group

Mint had reported in August that all three independent directors had raised concerns regarding PFC’s ability to underwrite the loan to SP group, which had large exposure to real estate construction and infrastructure.

The directors had also questioned the rationale behind giving the loan to the group’s main investment vehicle, Sterling Investment Corporation Pvt Ltd (SICPL), against the pledged shares in Tata Sons, the holding company of Tata Group, to refinance the debt taken three years ago at a coupon of 19-22%.

This when Tata Sons had clarified to The Economic Times in an interview that the pledged shares cannot be transferred by SP Group in the event of a default.

Funds raised via NCDs

To be sure, SICPL had raised ₹18,000 crore via non-convertible debentures (NCDs) after pledging its 9.18% stake in Tata Sons shares in 2021.

With PFC declining to lend, SP Group will now have to find other ways to repay the debt of high yielding bond investors like Ares SSG, Farallon Capital, David Kemper and other domestic HNIs, who had bought the bonds.

Also read |  PFC loan backed by 6x loan value: SP Group

PFC’s clarification comes a day after SP Group’s investment arm Goswami Infratech Pvt Ltd (GIPL) repaid nearly 35% of the bond on Thursday, by using the proceeds from its stake sale in Gopalpur Port. The conglomerate had sold its 56% stake in Gopalpur Port to Adani Ports and Special Economic Zone (APSEC) last month.

Earlier this month, GIPL’s subsidiary Afcons Infrastructure raised ₹5,430 crore through initial public offering (IPO).