SP Group seeks funds as Tata Sons IPO

The Shapoorji Pallonji (SP) Group is in talks to raise 3,500 crore rupees to meet a looming debt payment. Its financial fate remains closely linked to the uncertain prospect of an initial public offering for Tata Sons, where it holds an 18 percent stake.

According to people familiar with the matter, the engineering and construction conglomerate is negotiating with lenders to exercise a greenshoe option on an existing 21,350 crore rupee facility. This would provide the needed 3,500 crore rupees. Deutsche Bank AG, which underwrote the July financing, is set to provide the bulk of the new funds. SP Group and Deutsche Bank both declined to comment.

Debt Payment Extension Sought

On Monday, the group sought to extend the due date for the 3,500 crore rupee payment by one month to the end of October. The payment is owed by its financing arm, Porteast Investment. The people said the company is likely to offer a slightly lower yield than its July borrowing because secondary market rates for SP Group have improved.

The debt-laden group may continue to face repayment pressure until it can unlock the value of its Tata Sons stake. It has already secured extensions on other obligations this year. These included bonds sold by subsidiary Goswami Infratech, which have now been repaid, and a waiver allowing Porteast's loan-to-value ratio to reach 40 percent.

Porteast is also seeking to extend that 40 percent loan-to-value limit, which expires on September 30, by another six months. Porteast raised $3.4 billion through zero-coupon bonds last year, backed partly by the Tata Sons stake. Its previous loan-to-value limit was 34 percent.

Funds From July Facility Diverted

The initial 21,350 crore rupee facility was raised in July through local currency bonds issued by Eqyizen Investment Pvt. And a separate dollar bond sold by another unit called Mercury Finance Co. Part of that money was intended to help service Porteast's bonds. However, the people said the funds were used to repay Goswami bonds and debt at Shapoorji's other units, including Simar Port.

Tied to Tata Sons Leadership Battle

SP Group's financial predicament is a spillover effect of a power struggle within Tata Sons. The conflict is between executives Noel Tata and Natarajan Chandrasekaran over the company's future. Noel Tata has strongly opposed a plan by Chandrasekaran and the board to pursue an IPO, arguing the business should stay private for as long as possible.

SP Group said last week it was ready to work with Tata Sons on a potential listing. It stated the move could become a bridge for reconciliation between the country's oldest business families. Noel Tata also presented a separate SP proposal to monetize part of the stake through a share buyout. That transaction would generate at least 25,000 crore rupees for the construction giant.

Until either option happens, SP Group will need to keep raising funds, refinance debt, or seek extensions. The 160-year-old firm has relied on costlier private credit and sought multiple extensions from bondholders. It ran into cash-flow pressures after the pandemic, when it piled on large amounts of debt. The strain also prompted the group to list its units and sell assets.