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MUMBAI : Lenders to Shapoorji Pallonji and Co. Pvt. Ltd are planning to defer principal repayments by eight quarters and suspend interest till September as part of a debt recast for the cash-strapped company, according to documents reviewed by Mint.

The terms of the recast proposal, however, require Shapoorji Pallonji and Co. to pay the previously agreed interest rate and fully repay the principal. Promoter borrowings of 2,724 crore as of 31 March 2020 is, however, expected to be converted into perpetual debt, showed the document, a letter sent by Care Ratings to SBI on 27 February.

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The flagship company of the Shapoorji Pallonji group approached lenders, led by State Bank of India, for a recast after the covid-19 pandemic disrupted business. However, its hopes of raising funds by pledging its substantial stake in Tata Sons, the parent of Tata group companies, were dashed after the court blocked its efforts on a petition by India’s largest conglomerate.

While the SP group claimed that its 18.4% shareholding in Tata Sons is worth over 1.75 trillion, the Tata group valued that stake at less than half of that figure. In December, the Tata group also rejected an SP group proposal to swap its Tata Sons’ shares for stakes in listed Tata group companies.

The company had applied for a debt recast in September, and banks signed an inter-creditor agreement in November to finalize the plan and implement it.

In August, the Reserve Bank of India allowed lenders to restructure loans under a special window. While the recast had to be invoked by 31 December, banks have time till the end of June to implement the plan for companies and till 31 March for retail borrowers.

As part of the recast proposal, a total of 22,183 crore worth of debt of Shapoorji Pallonji Co. is being considered for easier payment terms.

The plan has received an RP4 rating from Care Ratings. Under the Reserve Bank of India’s (RBI) one-time restructuring framework, companies should obtain a minimum rating of RP4 to be eligible under the scheme.

The rating signifies that the debt has a moderate degree of safety regarding timely servicing and carries moderate credit risk.

“The above rating is subject to the resolution proposal being implemented as per the terms stipulated in the information memorandum shared on behalf of State Bank of India in February 2021 and other information submitted to Care," it said.

Emails sent to spokespeople for SBI and Care Ratings remained unanswered, while Shapoorji Pallonji declined to comment

“The company (Shapoorji Pallonji) proposes to raise funds through part or full monetization of its assets ( 10,332 crore). Proceeds from the proposed monetization of assets would be utilized towards prepayment of loans ( 9,348 crore)," the document showed, adding that a partial or full divestment of the company’s stake in Eureka Forbes Ltd, Sterling and Wilson Solar Ltd and Afcons Infrastructure Ltd is being considered in FY22.

So far, the group has had little success in monetizing its assets. In April 2020, the group sold 317 megawatts of solar projects to private equity investor KKR & Co. for 1,554 crore. Mint reported in August that the group was also planning to sell power purchase agreements for 350 MW of undeveloped solar projects.

Indian lenders have agreed to restructure loans worth more than 1 trillion under the new norms that allow repayment terms to be changed without classifying them as non-performing. The amount is significantly lower than initial estimates by analysts. For instance, SBI, India’s largest lender by assets, has approved a recast of 18,125 crore of loans, most of them from the corporate sector.

Experts said the banking sector is poised for faster-than-expected credit growth in FY22, with RBI’s relief measures cushioning the pandemic’s impact on companies and lenders.

On 22 February, India Ratings and Research revised its outlook on the overall banking sector for FY22 to stable from negative.

“This is because substantial systemic measures have reduced the system-wide covid-linked stress below the expected levels. Banks have also strengthened their financials by raising capital and building provision buffers," it said.

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