Shapoorji's $1.2 bn deal with ADIA on hold over debt issues, coronavirus

Shapoorji Pallonji Group has kept its ambitious logistics venture with Abu Dhabi Investment Authority (ADIA) on the back burner on account of debt issues and the pandemic, said people in the know.

The group had planned to launch a $1.2-billion venture with ADIA, wherein the partners were to raise the money in two tranches of $600 million each. The venture was to invest in logistics centres in the country. 

“Shapoorji was to put in $100 million, and the ADIA $500 million, initially,” the people said, adding that Shapoorji was already looking for land parcels. Shapoorji’s realty arm was spearheading the venture.

“Shapoorji is tackling its own debt issues, and does not want to commit equity to a new venture. They are moving very cautiously on new ventures,” said a person who has worked with the group in the past. “Overall, since all its businesses are down due to pandemic in the past eight months, it’s a logical move to put the new venture on hold.”

When contacted, a Shapoorji Pallonji Real Estate spokesperson declined to comment. A mail sent to ADIA did not elicit any response. The the Abu Dhabi sovereign fund had earlier tied up with Shapoorji to buy commercial assets, too.

Shapoorji has faced many headwinds in the recent past on debt repayments and asset monetisation. 

The group defaulted on loan repayment to its listed subsidiary, Sterling & Wilson, which has given it another one year to repay their loans.

Share sale by at least two group firms — Afcons Infrastructure, one of the country's top engineering, procurement, and construction companies, and water purifier Eureka Forbes — was postponed, making it difficult for the group to monetise assets. However, according to recent reports, the group has restarted talks to sell stake in Eureka Forbes.

The company had struck a deal with private equity firm Brookfield to raise Rs 3,750 crore of debt by pledging a portion of its 18.4 per cent stake in Tata Sons. However, the deal did not go through because of Tatas taking legal objection.

On a stand-alone basis, SP Construction, the holding company of the group, has asked banks to restructure Rs 10,900-crore of its debt through the one-time loan restructuring under the Covid-19 resolution framework approved by the RBI.

To generate cash flows, Shapoorji Pallonji Real Estate has been focusing on residential projects. It has lined up over half a dozen new projects and new phases in Mumbai, Pune, and Bengaluru between this month and March. It also took moratorium on some of the loans taken to buy land parcels.