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Inside the Deal

The financing was structured as a three-year, zero-coupon rupee bond, offering investors an impressive 19.75% yield. The deal’s loan-to-value (LTV) ratio of approximately 16% is considered relatively conservative, backed by a combination of real estate, infrastructure, and equity assets.

At the centre of the collateral pool lies Shapoorji’s stake in Tata Sons, estimated to be worth $18.6 billion. Complementing this are $3.6 billion worth of real estate and energy assets. These will likely be liquidated first, offering some buffer before investors would need to tap into the Tata stake.

Global Interest, Local Complexity
This record-breaking issuance has drawn some of the world’s largest private credit investors:

• Ares Management
• Cerberus Capital Management
• Davidson Kempner
• Farallon Capital

Deutsche Bank served as the sole arranger and underwriter, helping structure the deal and onboard investors amid various regulatory and legal uncertainties.

The Caveats: Not All That Glitters
Despite the headline-grabbing numbers, the deal isn’t without complications:

• Transferability of Tata Sons Shares: The Tata Sons shares—which anchor the collateral—are not freely transferable. The company’s board has veto rights over any sale or transfer of shares, and past legal tussles between the Tata and Mistry families only add more friction to this possibility. If investors need to enforce the collateral, a legal battle could ensue.
• Regulatory Uncertainty: The Reserve Bank of India (RBI) is considering reclassifying one of the entities holding the pledged shares, requiring it to maintain a capital adequacy ratio of 15%. Failure to comply could trigger an increase in the bond’s yield, adding to the group’s cost of capital and investor risk.
• Asset Monetization Risks: While Shapoorji has announced plans to list its real estate business and has already spun off companies like Afcons and Sterling and Wilson Solar, the actual liquidity from these initiatives remains to be seen. Successful IPOs and asset sales are critical for honouring obligations under the new debt structure.

Restructuring in Motion
To its credit, Shapoorji Pallonji has made strides in reducing its financial burden:

• Rated debt has reportedly been cut in half
• Key subsidiaries have been listed or are in the pipeline
• Several non-core assets have been divested, bolstering liquidity

This deal is clearly part of a wider strategic overhaul aimed at cleaning up the group’s balance sheet and restoring lender confidence.
A Reflection of Broader Trends
The Shapoorji deal is emblematic of a larger trend unfolding in India:

• India’s private credit market hit $9.2 billion in deals in 2024, a 7% year-over-year increase
• Global giants like KKR, Goldman Sachs, and BlackRock are expanding their private credit footprint in India
• Sovereign wealth funds from the Middle East and Indian government-backed institutions are also betting big on infrastructure and alternative debt

This boom is partially fuelled by India’s $1 trillion infrastructure push, with private credit stepping in to fill the gaps left by cautious banks and capital markets.

Final Thoughts
The $3.4 billion refinancing by Shapoorji Pallonji is a high-risk, high-reward deal that encapsulates both the promise and perils of India’s private credit ecosystem. For investors, the deal offers a rare mix of scale, yield, and exposure to India’s infrastructure story—but with substantial execution and legal risks.
Still, one thing is clear India is now firmly on the radar of global credit investors, and this deal could open the floodgates for more large-scale, structured credit plays in the years to come.