Shapoorji Pallonji debt crisis: Tata Sons exit & $1.2bn repayment challenge
Shapoorji Pallonji Group faces a $1.2 billion loan repayment by December, pledging its entire Tata Sons stake. This debt, part of the Mistry family's huge liabilities, complicates their ongoing exit negotiations. Lenders seek clarity as unlisted Tata Sons shares require Tata Group's consent for any sale, raising doubts about recovery.
New Delhi: Amid infighting in the Tata Trusts, a major development news in regards to exit activities of Shapoorji Pallonji Group (SP Group) from Tata Sons has reportedly come to the fore. It is reported that the Shapoorji Pallonji group has to repay a loan of about 1.2 billion dollars by December, for which it has pledged its entire stake in Tata Sons.
Moneycontrol quoted sources saying that the group has refinanced existing borrowings of about $3.2 billion and is going to repay the forthcoming instalment covering both the principal amount and interest within two months. The estimated promoter level debt on the Mistry family is Rs 25,000-30,000 crore, which is almost half of the group's total debt of Rs 55,000-60,000 crore.
According to sources, the Shapoorji Pallonji Group may find it difficult to raise the necessary funds to meet its repayment obligations, which may further complicate the ongoing negotiations with Tata Sons on its proposed exit, where it owns more than 18 per cent stake.
Sources said that the lenders may seek additional relief from the SP Group in the form of more collateral or clarity on its asset monetisation schemes, which include assets linked to shares of Tata Sons. This loan is fully backed by the assets of the SP group, which includes shares of Tata Sons.
Tata Group's consent is required
However, it is unclear how implementing this mortgage would help lenders recover their dues, as Tata Sons shares are not listed and cannot be sold to external buyers without the consent of the Tata group. As of now, the Tata group has not indicated whether it is willing to offer full or partial exit to its stake to the SP group.
Debt problems on SP Group
A major portion of the debt goes to Sterling Investments Private Limited, the promoter unit of the SP Group, which in 2021 received $2.6 billion from Ares Management and Fairlon Capital for a three-and-a-half year period. Sterling Investments owns a little more than 9 percent stake in Tata Sons, the holding company of the Tata group.