The board of the state-run Power Finance Corporation (PFC) has approved a Rs 150 billion loan to the Shapoorji Pallonji (SP) group companies, providing a significant financial boost to the Mistry family. The Mistry family, who are the promoters of the SP group, hold an 18.37% stake in Tata Sons, as reported by a source. This loan aims to help settle promoter debts and meet the financial obligations of their operational firms to creditors.
The loan will be secured against the cash flows from the SP group's real estate business and the Mistry family's shares in Tata Sons. It will also have a four-year tenure, with an additional component to cover interest costs for the first two years. A formal sanction letter is expected, which may include specific conditions.
In May, another source reported that the SP Group began discussions with PFC to secure up to $1.2 billion for refinancing part of the Rs 200 billion 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 use the loan proceeds to pay off bondholders. The SPVs will hold the family's stake in the real estate business, with PFC having a lien on the SPVs' bank accounts, 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. 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 70 billion through an initial public offering (IPO).
On March 26, the SP Group announced an agreement with Adani Ports and Special Economic Zone to sell a 95 % stake in Gopalpur Port in Odisha for Rs 13.49 billion. 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 211.79 billion 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 by the power ministry in May. In the fourth quarter of FY24, PFC reported a consolidated net profit of Rs 75.56 billion, marking an over 23% year-on-year rise, mainly due to the expansion of the loan portfolio. (Source: Business Standard)
