Tata go-ahead not needed to pledge shares, says Shapoorji Pallonji Group

Has approached foreign banks for a Rs 5,000-crore bridge loan

Shapoorji Pallonji (SP) Group does not need Tata Group’s permission to pledge a part of its 18.5-per cent stake in Tata Sons, said a top executive of SP Group.

Its stake is worth Rs 2.4 trillion; its immediate fund requirement is just Rs 5,000 crore to pay Indian lenders, in keeping with the one-time restructuring (OTR) of the debt proposal.

“The Supreme Court (SC) has not issued any order to the effect that SP Group stake cannot be pledged. The Tatas have not filed any review petition either,” said the executive.

The group has not asked the Tatas for permission to pledge its stake. None of the banks have any objection to the pledge, he clarified. 

The group’s flagship has secured a one-time settlement with Indian lenders and promised to sell its stake in renewable power firm Sterling and Wilson Solar (S&W Solar), consumer products maker Eureka Forbes, and land parcels to repay bank debt by June next year.

The sale of Eureka Forbes will be finalised in the next 45 days and banks will be repaid on time, added the executive quoted earlier.

A lender source said SP Group has approached a few foreign banks for a bridge loan worth Rs 5,000 crore. The matter is currently under discussion.  There were reports that the Tatas may object to the pledging of shares, given they have the right of first refusal of shares. If the Tatas litigate, then SP Group will have no option but to fight back, he further added. 

Bankers said they want to avoid litigation over Tata Sons’ pledged shares and are looking at other assets of the group as collateral. 

In September last year, group flagship Shapoorji Pallonji & Company had filed an application to its lenders for an OTR of its loans (including the lenders’ exposure in the form of fund-based and non-fund limits, commercial papers, and non-convertible debentures) under the Reserve Bank of India’s resolution framework for Covid-related stress. The OTR was invoked on October 26, 2020. The inter-creditor agreement was signed by all eligible lenders on November 24, 2020.

The group flagship’s debt repayment obligations in 2020-21 was Rs 5,320 crore at the standalone level and Rs 10,000 crore at the consolidated level. The total group borrowings amount to more than Rs 25,000 crore, while the flagship has Rs 23,500 crore of debt. Citing Covid-related delay, the group failed to repay its debt and sought the OTR.

The group promised to repay its debt in four equal quarterly instalments starting June 30, 2022. In the meantime, it said it would sell its assets and investments, and use the inter-corporate deposit repayments from group firms to pare debt. Since the stake sale is taking time, this may lead to further liquidity issues for the company, said bankers.

In March this year, the SC had rejected an appeal by SP Group, which sought a director seat on the Tata Sons board and removal of SP Group scion Cyrus Mistry as executive chairman. The SC did not give any directions on the pledging of shares. This may become another bone of contention between SP Group and the Tatas, said lawyers.

A Tata Group spokesperson did not respond to email queries till the time of going to press. A spokesperson for SP Group declined to comment on its fund-raising plans.

The promoters of SP Group have already infused funds worth Rs 1,740 crore into the flagship company in 2018-19 and Rs 1,968 crore in 2019-20. The group also raised funds by listing S&W Solar. The promoters planned another fund infusion of approximately $1.4 billion in the last financial year. This was unsuccessful due to a legal dispute with Tata Group.