The rally comes after the CNBC-TV18 newsbreak of Reserve Bank of India rejecting Tata Sons’ application to surrender its registration as an upper-layer NBFC, effectively bringing the holding company back into focus over its listing requirement. Select Tata Group stocks also rallied sharply on Tuesday following the development.
The Shapoorji Pallonji Group is the largest minority shareholder in Tata Sons, with the Mistry family holding around 18.4% of the holding company. The Tata Sons stake has been central to the group’s promoter-level borrowing programme.
Tata Sons listing key for SP Group
The SP Group has used its Tata Sons holding as collateral for multiple financing transactions over the years. Its latest refinancing, completed in July, raised around ₹21,500 crore, largely against the Tata Sons stake.The group, however, faces a repayment obligation of around ₹3,500 crore by the end of September, with failure to meet the payment potentially being treated by lenders as an event of default, according to an August 27 report by Moneycontrol.
Lenders have been looking for progress beyond another refinancing and expect the SP Group to reach an arrangement with Tata Sons around a potential liquidity event involving its stake, according to the report.
The latest bond structure also includes milestones linked to monetisation of the Tata Sons holding, including a requirement for a resolution, heads of terms for a transaction or an IPO announcement within 18 months of issuance.
The immediate repayment of ₹3,500 crore, if made, would also improve collateral cover on the group’s borrowings, with the loan-to-value ratio expected to fall to around 32% from about 40%.
Why Afcons is in focus
Afcons Infrastructure is part of the Shapoorji Pallonji Group, which has been seeking avenues to unlock value from its Tata Sons holding as it manages its debt obligations.The group had also used proceeds from the Afcons Infrastructure IPO and the sale of Gopalpur Port to reduce part of its promoter-level debt, according to the August 27 report.
Shares of the company rose as much as 20% on Tuesday, hitting an intraday high of ₹304.55. The stock is currently trading 14% higher at ₹288.8 having pared some of the early gains. The stock not only trades below its IPO price of ₹463 per share, but is also down 27% so far this year.
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