Shapoorji Pallonji One-Time Restructuring Plan In Final Stages

Construction and real estate firm Shapoorji Pallonji Company Pvt Ltd is in the final stages of a one-time restructuring of its debt under a special dispensation provided by the Reserve Bank of India following the Covid crisis.

Close to Rs 11,000 crore in debt out of a total of Rs 22,183 crore is up for restructuring, three people in the know confirmed, speaking on conditions of anonymity.

According to the people quoted above, the group will look to defer repayments on this debt for two years as part of the restructuring plan and convert the interest due in this period to a funded interest term loan. A funded interest term loan is where banks convert any interest due into a credit facility and add it to the outstanding dues of the borrower.

CARE Ratings has assigned an RP4 rating to Shapoorji Pallonji Company’s debt facilities worth Rs 22,183 crore, according to a letter sent by the rating agency to lead lender State Bank of India (SBI), on Feb 27. BloombergQuint has reviewed a copy of the letter. The rating is a pre-requisite for restructuring. An RP4 rating indicates a moderate degree of safety regarding timely servicing of financial obligations.

Apart from the deferral of payments and converting interest into a funded interest term loan, the plan also calls for the following according to the rating agency’s letter:

No concession in rate of interest.
Sale of at least a part of the company’s stake in Eureka Forbes Ltd, Afcons Infrastructure Ltd and Sterling and Wilson Solar Ltd worth Rs 10,334 crore in the next financial year.
Sale proceeds to be used to retire bank loans worth Rs 9,348 crore.
Proceeds worth Rs 836 crore from maturing inter-corporate deposits to be used to repay some debt and manage operations.
Promoter debt of Rs 2,724 crore to be converted to perpetual debt.

Mint newspaper had first reported on Wednesday that lenders have finalised a resolution plan for Shapoorji Pallonji Company.

Queries sent to Shapoorji Pallonji on Tuesday and an additional query sent on Wednesday remained unanswered. Queries sent to the State Bank of India on Tuesday remained unanswered. CARE Ratings did not respond to queries mailed on Wednesday.

As per a rating released by ICRA Ltd on January 7, Shapoorji Pallonji Company had non-fund based limits worth Rs 15,000 crore and fund based limits up to Rs 6,000 crore available from lenders.

“Timely implementation of the resolution plan within the regulatory timelines, with favourable terms easing the burden on the cash flows resulting in improvement of coverage metrics, remains critical and would be a key rating monitorable,” the rating agency had said while reiterating its decision to place the group’s ratings under rating watch with negative implications.

According to ICRA, the company had free cash balances worth Rs 181 crore as of November 30 and had missed repayment obligations to lenders. However, “the estimated cash flow from operations along with the existing cash balance would not be adequate to meet the high repayment obligations falling due over the short to medium term,” the rating agency had said.

The flagship firm of the Shapoorji Pallonji Group, whose debt is being restructured, is the holding-cum-operating company for 18 group companies spread across six sectors including engineering and construction, infrastructure and real estate. It is among the few large corporates which decided to restructure its debt under the RBI’s one-time restructuring scheme.

The scheme did not find many takers as the parameters recommended by the Kamath committee were so stringent that weaker companies could not get approvals, two of the three people quoted above said. Bankers had previously estimated that companies with outstanding debt worth less than Rs 2 lakh crore had sought to restructure their debt.