Power Finance Corporation Approves Rs 15,000 Crore Loan to Shapoorji Pallonji Group

The board of Power Finance Corporation (PFC), a state-run entity, has approved a Rs 15,000-crore loan to companies within the Shapoorji Pallonji (SP) Group. This move is significant for the Mistry family, the group’s promoters and 18.37% shareholders of Tata Sons, as it will help them repay personal debts and fulfill commitments to creditors.

Loan Details:

• Security: The loan will be secured against the cash flows of SP Group’s real estate business and the Mistry family’s shares in Tata Sons.
• Terms: The loan may have a four-year term and include funds to cover interest costs for the first two years.
• Disbursement: The loan will be given to two special purpose vehicles (SPVs) created by the Mistry family. These SPVs will use the funds to pay off bondholders and will house the family’s real estate shareholdings. PFC will have control over the SPVs’ bank accounts, accessing dividends and potential sale proceeds from the real estate business.

Earlier this year, the Mistry family sought loans from Deutsche Bank and PFC to repay bonds sold to global credit funds. These bonds, secured by Tata Sons shares, were due for redemption but have been extended until September with a 20% interest rate.

Operational Context:

• Construction Sector: Major companies under the Mistry family, including Shapoorji Pallonji and Company Limited and Afcons, operate in the construction sector. Afcons is preparing for an initial public offering (IPO).
• Real Estate Expansion: The family is also expanding its real estate business, which owns valuable land in major Indian cities.

Tata Trusts’ Concerns:

• Tata Trusts, the main shareholders of Tata Sons, are concerned about using Tata Sons shares as collateral for loans. They argue that these shares are not freely transferable.
• PFC has reviewed the legal implications of using unlisted shares as loan security and has found it acceptable based on legal advice.

Financial Implications:

• PFC’s Performance: PFC reported a record annual consolidated profit of ₹21,179 crore for 2023-24, making it the largest and most profitable non-banking finance company group in India.
• Mistry Family’s Debt: The Mistry family’s personal debts are around $3 billion. Clearing these debts will allow their companies to reinvest profits into business growth rather than using them for debt repayments.

This loan approval by PFC marks a significant financial boost for the SP Group, aiding in debt repayment and facilitating further business growth.