One of the largest shareholders in Tata Sons, the Shapoorji Pallonji SP Group, is reportedly in talks to pledge the other half of its stock in the Tata Group’s unlisted holding company in order to fund $1.75 billion. They said that the SP Group was aiming to inject funds into its running companies and repay a portion of its debt.
Nearly 9% of the group’s 18.37% ownership position in Tata Sons has already been committed. Following this most recent deal, the entire shareholding, which is currently estimated to be worth close to Rs 94,000 crore, would be committed to lenders, including two foreign banks and numerous foreign hedge and credit firms. A Mistry family firm, Cyrus Investment Pvt Ltd (CIPL), would raise the payment-in-kind (PIK) loan with a zero-coupon rate, and it would be reimbursed at a predetermined value at the end of the maturity period, which is most likely to be three years.
The group has chosen Standard Chartered Bank (SCB) and Deutsche Bank (DB), both of which are its long-term relationship banks, to syndicate the loan, according to one of the people. Other lenders are talking about joining the transaction, in addition to SCB and DB. They consist of the Canadian public pension fund OMERS, international hedge funds Cerberus Capital Management, Ares SSG, Oaktree Capital, and Davidson Kempner Capital Management, and foreign hedge funds Cerberus Capital Management, Ares SSG, and Oaktree Capital.
A second individual added, “With this, the total value of the loans raised by Mistry family-held entities against shares of Tata Sons will exceed $3 billion.” “The group has already raised approximately $1.6 billion from a variety of lenders beginning in 2021, and it has repayments maturing to the tune of $750 million by the end of the current year.”
Bankers with knowledge of the negotiations say that the SP Group, which is mostly owned privately by the Mistry family, will use some of the money to inject capital into its running companies.
They said that in addition to being listed on public markets, these will be monetized through share sales to financial and strategic investors.
The SP Group, which was established by Pallonji Mistry in 1865, is one of India’s oldest diversified industrial conglomerates. It operates in a number of industries, including real estate, building, infrastructure, solar power generation, and related services for the oil and gas industry.
To increase operating cash flows, the organisation recently set up parallel holding companies for its infrastructure and real estate businesses. After the late Cyrus Mistry was fired as chairman of Tata Sons in 2016, the group’s relationships with the Tata Group, which had previously been close, worsened. The Tata Group prevailed after a contentious legal struggle between the two sides.
