Shapoorji Pallonji and Company Private Ltd (SPCPL), the holding company managed by Cyrus Mistry and his elder brother Shapoor Mistry, has pledged the shares of some of its subsidiaries and associates post-COVID-19 to raise resources from banks and other lenders.
The holding company has pledged the shares of Forbes and Company, Afcons, a large infrastructure arm, SP Imperial, Sunny View, Devine Realty and Constructions etc.
The Group with exposure to real estate, construction and infrastructure sector, is in need of funds for repayment of debt, completion of projects and growth. The pledging of shares by the group company shows the challenging period as the COVID-19 outbreak and the resultant slowdown in the economy have impacted the cash flows severely and also delayed the asset monetisation initiatives.
In fact, the sectors like construction and real estate were stressed even before the COVID-19 outbreak.
Care Ratings recently noted that the promoters planned the fund-raising of Rs 11,000 crore, which remained unsuccessful till September this year. One of the reasons for delay is the pledging of Tata Sons stake to raise resources. The Mistry brothers were banking on pledging their 18.4 per cent stake in the Tata holding company which is estimated to be Rs 1.78 lakh crore.
The Supreme Court has put a stay on it as Tatas have claimed to have the first right to buy the shares at fair market value. This provision in the article of association of Tata Sons would discourage any investors or lenders to come forward to accepting such a pledge.
The holding company has already approached the banks for a one-time restructuring under the COVID-19 relief package. The two-year restructuring window will provide interim relief to the group.
The stress in the group is quite visible in the market. Last month, the rating agency Care Ratings put the rating of the group company's commercial paper and proposed NCD issue under rating watch with negative implications. Around the same time , the holding company had asked for more time to pay the dues to its group company Sterling and Wilson Solar Ltd.