The cost of leverage is rising for one of India’s largest conglomerates as credit investors reprice execution risk.
Shapoorji Pallonji (SP) Group’s unit, Goswami Infratech, is planning a massive ₹250 billion ($2.77 billion) bond issuance, but the yield expectations have spiked following a covenant breach at a sister entity.
📉 THE “PORTEAST” CONTAGION: Investors are demanding a premium based on a recent benchmark set by another SP unit, Porteast Investment.
- The Benchmark: Porteast raised record debt in May at 19.75%.
- The Trigger: In December, Porteast missed a covenant deadline linked to a stake sale, triggering a step-up clause that pushed its rate to 21.75%.
- The Impact: Lenders now view 21.75% as the new floor for Goswami Infratech, arguing that risk parity must apply across the group structure.
🏗️ THE DEAL STRUCTURE:
- Instrument: Two-year zero-coupon bonds.
- Collateral: Secured by the group’s crown jewel—a 9.2% stake in Tata Sons.
- Use of Proceeds: Refinancing high-yield notes maturing in April 2026.
⏳ THE TIMELINE SQUEEZE: Originally slated for January, the deal closing has reportedly slipped to March. This creates a tight window against the April maturity wall, giving investors (including reportedly PIMCO, BlackRock, and Vanguard) significant leverage in negotiating terms.
💡 ANALYST TAKEAWAY: This situation highlights the “double-edged sword” of holding company financing. While the Tata Sons collateral is arguably the most valuable liquid asset in corporate India, the group’s recurring liquidity crunches are forcing it to pay distressed-level yields (21%+) to access that value. The delay to March signals that price discovery is proving painful.
👇 Credit Analysts: Is a 21.75% yield attractive enough for exposure to Tata Sons equity, or does the refinancing risk outweigh the collateral coverage?