Business

Will honour Sterling debt: Shapoorji Pallonji Group

Will honour Sterling debt: Shapoorji Pallonji Group
MUMBAI: Shapoorji Pallonji (SP) Group chairman Shapoor Mistry on Sunday said that the diversified enterprise is “fully committed to honouring” its debt obligations towards Sterling and Wilson Solar. The statement came a couple of days after the stock of the group company tanked 20% on Friday following a proposal by promoters SP Group and Khurshed Daruvala seeking more time to repay the dues.

The construction-to-consumer durables conglomerate and Daruvala were scheduled to pay Rs 2,563 crore to Sterling by November 18 (Monday). But they had last week asked for a revised debt repayment schedule. Mistry said that the request for an extension of time “does not in any way dilute the group’s intent to honour these payments”. The shadow banking crisis, sparking a credit crunch, coupled with the low realisation from Sterling’s August IPO (which was actually an offer for sale, or OFS), have made the promoters seek more time to repay the outstanding amount.

The promoters had originally planned to raise Rs 4,500 crore through the IPO and this amount, said Mistry, would have been sufficient to address the liquidity needs and manage the repayment dues to Sterling. But, the issue size had to be curtailed to Rs 3,125 crore due to unfavourable market conditions.

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Eventually, the promoters managed to raise only Rs 2,850 crore. Considering the reduced issue size, the promoters had indicated a 90-day period to repay the Sterling loan. After Sterling got listed, the promoters repaid Rs 250 crore and sought on Thursday some more time to repay the rest. The promoters plan to repay Rs 1,000 crore by December and will work out a fresh repayment schedule for the remaining Rs 1,313 crore at that time.

“The tight liquidity in credit markets has been one of the harshest in recent decades, although the interventions by the government have started showing signs of improvement,” said Mistry. He added that the group has the wherewithal to overcome the challenges in the current credit environment.

The SP Group, with revenues of Rs 55,000 crore and an operating profit of Rs 5,000 crore, is India’s biggest privately held conglomerate. The group, known for constructing landmark structures — like the Sultan of Oman’s palace, Brabourne Stadium in south Mumbai and the Presidential House in Ghana — has orders worth Rs 1.10 lakh crore on its books. Besides, the SP Group is looking to monetise some of its infrastructure assets in India and outside which, Mistry said, would help to pare the consolidated debt.

A certain section of the investor community has pulled up Sterling for not fulfilling the IPO’s objectives. Additionally, a top lawyer said Sebi guidelines govern usage of funds raised by a company in an IPO. Since the IPO of Sterling was an OFS, the rules haven’t been violated by seeking a revised debt-repayment schedule by the promoters. In an OFS, promoters sell their shares and hence the funds raised go to them and not to the company. In an IPO entailing fresh issue of shares, the funds raised go to the company.