Shapoorji Pallonji (SP) Group's unit, Goswami Infratech, is anticipated to face higher interest rates as it plans to raise new funds, sources familiar with the matter revealed. This development follows a similar situation with another SP Group unit, which was compelled to increase its interest rates, setting a precedent for investors.
Goswami Infratech, the real estate and civil engineering arm of the Shapoorji Pallonji Group, is reportedly planning to raise as much as ₹25,000 crore (approximately $2.77 billion) through a two-year zero-coupon bond issue in the coming weeks. However, the company may face delays in closing the bond issuance, initially expected in January, potentially pushing it to March.
The need for refinancing arises as SP Group promoter entity Sterling Investments (SIPL) has high-cost non-convertible debentures (NCDs), priced in the sub-20% range, are due to mature in March 2025, requiring the group to arrange for refinancing.
Market analysts suggest that the success of this fundraising endeavor will largely depend on the terms offered, considering the company's improved performance and demonstrated asset sales.
Investors are now reportedly seeking returns comparable to those offered by Porteast Investment, another SP Group entity. Porteast Investment experienced a notable increase in its borrowing costs, further influencing investor expectations. Porteast Investment initially secured three-year bonds at a 19.75% interest rate in May, raising ₹28,600 crores in what was India's largest corporate bond sale. However, the interest rate subsequently climbed to 21.75% in December after the company did not meet a covenant related to a stake sale in another company.
SP Group, however, disputes reports that Goswami Infratech is pursuing fundraising at a 21.75% rate. The company has stated that such reports are "grossly incorrect and totally misleading," emphasizing their intent to refinance the bonds at substantially tighter pricing, based on an improved credit profile. The new issue will use SP Group's Tata Sons stake as collateral.
The situation is further complicated by SP Group's complex web of cross-holdings. According to the draft red herring prospectus (DRHP) of Afcons, another SP Group company, there are 242 promoter group companies.
The group had previously received a crucial waiver from the Reserve Bank of India (RBI), which alleviated pressure on its $3.4 billion private credit deal and prevented increased borrowing costs. This waiver granted the group's non-banking finance unit, Sterling Investment Corp., a three-year extension to meet capital adequacy norms, thus averting a potential interest rate hike and possible default on a major deal that pledged a 9.2% Tata Sons stake as collateral. Major global investors participated in the bond placement by Deutsche Bank.
