Shapoorji Pallonji Group, a leading Indian real estate and construction business, plans to sign a $3.4 billion private credit deal soon. The deal involves a three-year, zero-coupon rupee bond having an annual yield of 19.75%. The utilisation of the fund raise is mostly towards the repayment of existing debts.
The company has grown from a family-run business into a major name in construction. It has built many skyscrapers, landmarks, and important infrastructure including the Indian central bank and the Al Alam palace for Oman’s Sultan.
As on date, this is going to e the biggest loan deal in India and marks a new step in India’s private credit market. The country’s growing need for infrastructure, driven by Prime Minister Narendra Modi’s initiatives, has increased demand for funding. This has led to more competition among foreign and local investors. The market has witnessed a huge influx of private credit funds in the Indian market. Firms like KKR, Oaktree, and Goldman Sachs are expanding their presence in India. Local firms are creating new funds, with Kotak Asset Managers planning a $2 billion fund.
In this loan deal, about twelve big investors are involved, including Ares, Cerberus, Davidson Kempner, and Farallon. Deutsche Bank is also investing and will manage the deal as the sole arranger and trustee.
Shapoorji has had a difficult history of loan repayments with some investors. Its subsidiary, Goswami Infratech, raised $1.7 billion two years ago through the biggest junk bond deal in India at higher yield. Last year, the company asked for more time to repay, offering higher yields leading to the same going to 20.75%.
With its new private credit deal, Shapoorji attracted back some old investors. Firms like Ares and Farallon had previously lent money to the group.
An Ernst & Young report shows India’s private credit deals totaled $9.2 billion last year across 163 deals. The report warns that increased competition is making it harder to close deals. It also says lending standards are being stretched.
The deal is expected to have a loan-to-value ratio of 16%. Funds will be paid out a few days after the deal is finalized.
The company or lenders / investors have not confirmed the deal as yet. The information is sourced from bloomberg.