With an aim to improving its financial profile, Shapoorji Pallonji and Company Private Limited (SPCPL) plans to reduce its external debt to Rs 6,200 crore by the end of March 2020 from over Rs 7,700 crore in December 2018.
SPCPL, the operating-cum-holding entity and flagship unit of the group, will also liquidate holdings in its land bank amounting to Rs 975 crore in six to nine months.
The total reported debt of SPCPL on a standalone basis has seen an increase from Rs 6,503 crore in FY16 to Rs 7,562 crore in FY18. At the end of December 31, 2018, total debt was Rs 7,753 crore.
Another step the company is taking to reduce debt overhang is to monetise investments through routes like the public offering. It plans raise funds to the tune of Rs 1,400-1,600 crore from initial public offering (IPO)/pre-IPO of Sterling and Wilson Solar Private Limited in calendar year 2019.
As on December 31, 2018, the guarantees given by SPCPL have further escalated to Rs 4,458 crore from Rs 3,689 crore as on March 31, 2018.
This does not include debt covered in the form of a letter of comfort given by SPCPL to its various subsidiaries, associates and joint ventures.
CARE had placed the long-term rating on credit watch with developing implication in December 2018 owing to highly leveraged capital structure of SPCPL (including corporate guarantees).
Subsequently, the group articulated a strategic plan to de-leverage its balance sheet via equity infusion and reducing debt by refinancing the debt service reserve account (DSRA) guarantee exposures in group firms. It was to monetise certain identified assets by the end of FY19. Ratings remain on watch even now.
In spite of the challenging economic environment and market situation, the group, in the second half of FY19, has steadily monetised certain assets to the tune of Rs 900-1,000 crore. This covered assets like Chennai IT Park, Pune IT Park and Solar Portfolio. Additionally, the promoters have infused about Rs 1,700 crore from their own sources into the company of which Rs 500 crore is by way of equity infusion to support and maintain liquidity in the system.
At a standalone level, the construction business remains the mainstay of SPCPL, accounting for over 90 per cent of its revenues.
Its order book stood at Rs 35,000 crore as on December 31, 2018, against Rs 36,000 crore as on September 30, 2018. This imparts strong revenue visibility over the next 3-4 years. Order book contains design and built contracts as well as orders from overseas markets that relatively have higher margins.