Shapoorji Pallonji unit likely to face higher costs in new fundraising

India's Shapoorji Pallonji Group (SP Group) could likely be saddled with higher interest rates when its unit Goswami Infratech raises fresh ‍funds, after another unit was forced ​to raise interest rates, two sources familiar with the plans said.

Goswami Infratech, the SP Group's real estate and civil engineering company, is planning to raise as much as ₹25,000 crore ($2.77 billion) through a two-year zero-coupon bond issue in the coming weeks.

In early discussions, investors demanded returns similar to those offered to investors in Porteast Investment, which sold three-year ​bonds at a 19.75 per cent interest rate in May, raising ₹28,600 crore in India's largest corporate bond sale ever.

However, the interest rate climbed to 21.75 per cent in December after it failed to meet a covenant linked to a stake sale in another company, the sources said.

"Now that the yield on Porteast Investment's debt has risen, investors are expecting a similar level for Goswami Infratech," one of the sources said.

The sources requested anonymity, as they are not authorised to speak to the media.

In a response to Reuters queries over the weekend, SP Group said, "Goswami Infratech is pursuing a fund raise at 21.75 per cent is grossly incorrect and totally misleading. The company will refinance the bonds well ahead of its due dates."

It added that based on feedback and in-principle interest from investors, the transaction will be at substantially ‌tighter pricing, reflecting an improved credit profile.

While confirming ​the rise in yield for the other unit, the statement said, "This temporary increase in Porteast financing will also step down to its original yield".

Goswami Infratech is now evaluating its options, which could also mean the deal will take longer to close, the source ‍said.

Bankers had been expecting the deal to close in January, with the company meeting investors such as Pacific Investment Management Co (PIMCO), BlackRock and Vanguard along with others, Reuters ‍reported ‌last month.

"It seems ​the issuance may be pushed to March," the second ‍source said.

Goswani Infratech plans to raise funds to refinance its outstanding high-yield notes maturing in ‍April ‍and another loan, as ‌well as for other debt-related and corporate purposes.