PFC board rejects SP Group’s Rs 20,000-crore loan proposal

Mumbai: State-run Power Finance Corporation (PFC) has decided not to proceed with the $PFC Chairman Parminder Chopra said in a conference call with analysts on Friday that it plans to provide a loan of Rs 20,000 crore to Shapoorji Pallonji Group (SP).

Nearly 10 months after discussions began, the board has refused to give the nod, which could derail SP Group’s debt repayment plans.

In a conference call with analysts, Chopra clarified that the board was not keen on PFC investing higher in new industries.

“We have conducted detailed due diligence. The board decided that since this is a new industry, we may not take on undue risk. Therefore, we have decided not to sanction the loan,” he said.

SP Group spokesperson responded Mint The inquiry said: “We understand that the PFC board does not wish to proceed with the proposal in its current form. We acknowledge that this structured credit proposal, which is very familiar to global investors, is groundbreaking for PFC. In this case, We understand the concerns expressed by the PFC board as the sole financier of such a large sum of money.”

Exploring alternatives

The spokesperson added that the group has begun exploring alternative transaction structures and taking into account PFC’s feedback, including engaging additional syndicated lenders to advance the transaction or completing similar transactions with other global capital pools.

SP Group said in a media statement in August that it had received a formal sanction letter from PFC on June 14. People familiar with the matter revealed Mint At that time, the sanction letter came with conditions and requested clarification.

SP Group added in a statement that cash flow from the property franchise will ensure full repayment of the loan within the term and that the proposal has been verified by “reputed third-party consultants”.

Mint reported in August that all three independent directors had expressed concerns about PFC’s ability to underwrite loans to SP Group, which has substantial exposures in the property construction and infrastructure sectors.

The directors also questioned the rationale for providing loans to Sterling Investment Corporation Pvt Ltd (SICPL), the group’s main investment vehicle, on pledged shares in Tata Sons, the group’s holding company, to refinance three-year-old debt with coupons of 19-22 %.

In an interview with the Economic Times, Tata Sons clarified that the SP Group cannot transfer the pledged shares in the event of default.

Funding raised through non-communicable diseases

To be sure, SICPL proposed $After committing to hold 9.18% stake in Tata Sons in 2021, it will raise Rs 18,000 crore through non-convertible debentures (NCDs).

With PFC refusing to lend, SP Group must now find other ways to repay high-yield bond investors, including Ares SSG, Farallon Capital, David Kemper and other domestic high-net-worth individuals who bought the bonds.

PFC’s clarification comes a day after SP Group’s investment arm Goswami Infratech Pvt Ltd (GIPL) on Thursday used proceeds from the sale of its stake in Gopalpur Port to repay nearly 35 per cent of its bonds. The group sold 56 per cent stake in its Gopalpur port to Adani Ports and Special Economic Zone (APSEC) last month.

Earlier this month, GIPL subsidiary Afcons Infrastructure raised funds $Raised Rs 5,430 crore through initial public offering (IPO).