India's prominent Shapoorji Pallonji Group (SP Group) may encounter steeper borrowing expenses as one of its key units prepares for a major fundraising exercise, according to sources familiar with the matter. This development follows a recent increase in interest costs for another group entity, setting a challenging precedent for the market.
Details of the Planned Fundraise
Goswami Infratech, the conglomerate's real estate and civil engineering arm, is gearing up to raise a substantial sum of up to 250 billion rupees ($2.77 billion). The company plans to achieve this through an issuance of two-year zero-coupon bonds in the coming weeks. The funds are intended to refinance existing high-yield notes maturing in April, repay another loan, and address various corporate debt purposes.
Investor Expectations and Precedent
During preliminary discussions, potential investors have reportedly benchmarked their expected returns against another SP Group unit, Porteast Investment. Porteast had executed a landmark bond sale in May, raising 286 billion rupees at an interest rate of 19.75% for three-year bonds, which was India's largest corporate bond sale at the time.
However, the scenario shifted in December when Porteast's bond yield surged to 21.75%. This increase was triggered after the unit failed to meet a financial covenant linked to a stake sale in a separate company, as confirmed by the sources. "Now that the yield on Porteast Investment's debt has risen, investors are expecting a similar level for Goswami Infratech," one source revealed, requesting anonymity due to lack of media authorization.
Company's Response and Revised Timeline
In a statement to Reuters over the weekend, SP Group strongly refuted the claim that Goswami Infratech is pursuing funds at a 21.75% rate, labeling it "grossly incorrect and totally misleading." The group asserted that the company would refinance its bonds well ahead of their due dates. It further stated that, based on investor feedback, the transaction would occur at "substantially tighter pricing," reflecting an improved credit profile.
While acknowledging the temporary yield increase for Porteast, the group expressed confidence it would step back down to its original level. Consequently, Goswami Infratech is now carefully evaluating its options, which may lead to a delay in finalizing the deal. While bankers initially anticipated a January closure, with the company having met major global investors like PIMCO, BlackRock, and Vanguard, a second source indicated, "It seems the issuance may be pushed to March."
