SP Group’s ₹25,000 Crore Bond Issue Price Likely to be Lower
Shapoorji Pallonji (SP) Group is preparing to raise approximately ₹25,000 crore (around $2.8 billion) through a strategic bond issue, anticipated to launch early April. This fundraising endeavor is expected to offer a reduced pricing compared to previous borrowing rounds, reflecting enhanced investor confidence.
Key Insights into the Bond Issue
– Pricing Decrease: The new bond pricing is expected to be approximately 300-400 basis points lower than the group’s last round, influenced by positive signals regarding asset sales and potential resolutions regarding its stake in Tata Sons.
– Market Response: Enhanced visibility on asset monetization has notably uplifted investor sentiment towards SP Group.
– Domestic vs. Overseas: The bond issuance will likely feature a 2:1 split favoring the domestic market, with an estimated ₹15,000-16,000 crore sought from rupee-denominated non-convertible debentures (NCDs).
Potential Structure of the Bonds
– Overseas Bonds: Plans include issuing a three-year dollar bond ranging from $750 million to $1 billion, with negotiations ongoing in private discussions.
– Improving Funding Costs: If executed as anticipated, this deal could lead to a tangible decrease in SP Group’s funding costs, signaling a resurgence of investor confidence in their refinancing strategies.
Factors Driving Investor Confidence
– Asset Sales and Stake Resolution: Recent discussions on the long-standing dispute with Tata Sons concerning stake monetization are promising. The SP Group, representing the Mistry family, holds 18.75% of Tata Sons, thereby marking it as the largest minority shareholder in the conglomerate.
– Investor Composition: Strong interest has been noted, with expectations that at least one-third of the funds will be sourced from dollar bond investors. The remaining funds are likely to be provided by foreign banks, domestic investors, and private credit funds.
Conclusion
The upcoming ₹25,000 crore bond issue by SP Group is shaping up to be a pivotal financial maneuver that could significantly lessen funding costs while restoring investor confidence. As the market awaits the outcome of ongoing discussions regarding Tata Sons, the potential for enhanced asset value and a refreshed credit profile for SP Group becomes increasingly clear. If successfully executed, this transaction could redefine the group’s financial landscape, supporting its long-term growth and sustainability.