India's Shapoorji Pallonji Group has successfully closed one of India's largest private credit transactions, raising approximately ₹15,100 crore ($1.6 billion) to refinance debt. The deal, backed by the group's 18.4% stake in Tata Sons, comprises a rupee-denominated non-convertible debenture priced at around 18.95% and a US dollar tranche expected to yield about 14.5%. The refinancing package was resized from the originally proposed ₹25,500 crore after the group recalibrated its funding requirements, with Deutsche Bank serving as the sole arranger for both tranches. A Mauritius-based entity played a crucial role, with the group separately raising $650 million through three-year dollar bonds at a 14.50% yield on Thursday. The funds will be used to refinance ₹15,500 crore in debt at Goswami Infratech, providing much-needed liquidity after the conglomerate had twice extended the maturity of this debt.
The fundraising attracted significant interest from both global distressed debt investors and domestic financial institutions. A group of local investors, including InCred Capital Financial Services, DSP Finance Pvt Ltd and IIFL Capital Services Ltd, subscribed to the rupee-denominated bonds, as reported by Business Standard. They were encouraged by prospects that the conglomerate could eventually monetise its 18.4% stake in Tata Sons Pvt Ltd, potentially unlocking billions of rupees in liquidity. Global investors demonstrated strong confidence with Farallon Capital Management, Davidson Kempner Capital Management and Cerberus Capital Management each purchasing bonds worth about $175 million to $200 million. The transaction underscores the depth of India's rapidly expanding private credit market, where local pools of capital continue to back large leveraged transactions despite heightened volatility in global markets.
Valuation was a key stumbling block in the negotiations, as reported by The Economic Times. The two sides were unable to bridge differences over the value of the unlisted Tata Sons stake and listed Tata group shares that could potentially form part of any swap arrangement. The combined market capitalisation of the group's 16 listed companies was ₹25.28 lakh crore on Thursday, with Tata Sons' stakes in these firms valued at about ₹11.9 lakh crore. The condition of not raising debt was regarded by the Mistry family as commercially impractical, reinforcing their long-held preference for a listing of Tata Sons as the most efficient route to unlock value without additional encumbrances.
The latest round represents part of the ₹25,500 crore that the SP Group plans to raise, with the group now seeking another $350 million worth of debt over the next six months, according to Business Standard. The borrowings are backed by shares in group firm Afcons Infrastructure Ltd. and Tata Sons, with the bond agreement requiring the company to repay ₹135 billion within 24 months. The transaction includes both rupee and dollar debt, allowing the conglomerate to diversify its investor base while refinancing high-cost borrowings. The strong demand for the deal reflects the strategic value of the backing of pledged Tata Sons shares, with much of the confidence stemming from this security arrangement.
While recent Reserve Bank of India directives on upper layer non-banking finance companies have fuelled speculation that a listing of Tata Sons could become a possibility over time, there is little clarity on whether this will materialise anytime soon. The talks have also sparked debate within sections of Tata Trusts, with some officials questioning whether Tata's reported involvement reflects a shift away from his earlier position of not being involved in matters relating to SP Group's shareholding due to family connections. However, another executive close to Noel Tata said he can certainly have a say in the matter as chairman of Tata Trusts, which holds 66% of Tata Sons. Noel Tata, Tata Sons and SP Group did not comment on the ongoing negotiations.
