PFC loan backed by 6x loan value: SP Group

Mumbai: Shapoorji Pallonji group, controlled by billionaire Shapoor Mistry, on Tuesday clarified that it has provided security cover that is six times the value of the loan that it will obtain from the Power Finance Corporation. The construction conglomerate also said that it has received a formal sanction letter after approval of the PFC board on 14 June, even as the non-bank lender clarified that it is yet to disburse this loan.   

“We are fortunate to work with PFC over the last 9 months to craft a unique proposal, that has a twin security structure leveraging the strength of the SP Group’s large real estate franchise, as well as a portion of the Tata Sons shares owned by the Mistry family. This provides a security value in excess of 6 times of the loan value,” said Venkatesh Gopalakrishnan, director – Group Promoters’ Office, managing director – SP Real Estate. “The cash flows from the real estate franchise will ensure a full repayment of the loan over the tenor. The entire proposal has been validated by reputed third party consultants,” he added.

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SP group had approached PFC for a loan of nearly ₹20,000 crore to refinance its existing debt. The conglomerate has raised a total of nearly ₹32,000 crore from global private credit funds and wealthy high networth individuals (HNIs) over the last 3 years in two tranches via non-convertible debentures (NCDs). The first tranche of ₹18,000 crore raised in 2021 was due to mature in the last week of May this year. The refinance loan from PFC was expected to settle this payment. 

In its statement, SP Group defended the PFC loan as a “refinance” not as a “bailout from default”

Mint had reported on Monday that all the three independent directors of PFC have questioned the rationale behind giving the ₹20,000-crore loan to SP Group’s main investment vehicle Sterling Investment Corp against the unlisted shares of Tata Sons, the holding company of India’s diversified conglomerate Tata Group. SP Group, is the single-largest minority shareholder in Tata Sons with an 18.37% stake.

Tatas have already made it clear that these shares are not transferrable and the group is not planning to list Tata Sons' shares, which was a requirement under the RBI guidelines for upper later NBFCs. In the event of a potential default by the SP group, these directors believe that PFC will be unable to sell these shares to recover its loan.

PFC's due diligence underway

Power Finance Corporation (PFC) on Tuesday reiterated that the non-bank lender has not disbursed any funds till date to the SP group. During the analysts’ call, the management of the government sponsored PFC clarified that the due diligence process is currently underway, post which the board will take merit-based decision. The company had issued a similar clarification in June this year.

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“...as we have earlier also clarified on the exchange that the diligence process is still underway, and no funds have been disbursed till date. So we have also declared at that point of time that post the completion of the detailed due diligence, both will take a decision on the merit basis and will accordingly decide what would be the outcome of this deal,” said Parminder Chopra, chairman and managing director, PFC, during the call on Tuesday.

Shares of PFC fell nearly 4.7% during trade on Tuesday following the news of dissent by its independent directors against the PFC loan.  Meanwhile, PFC reported 23.6% year on year jump in net profit to ₹3,717.8 crore at the end of June quarter compared to ₹3,006.94 crore during the corresponding period a year ago.  Net interest income or core income from its lending and borrowing operations, rose 24% year on year to ₹4,328 crore at the end of the June quarter.