Shapoorji Pallonji Group (SP Group), the single largest shareholder of Tata Sons, intends to raise funds through equity pledges and other means to repay part of the debt and inject cash into its operating companies. The group plans to raise about $1.7 billion; this time, Tata is unlikely to object.

It intends to raise part of the funds by pledging a stake in Tata Sons, the holding company for all Tata group companies. SP Group holding company Shapoorji Pallonji and Company (SPCPL), which contains an 18.37% stake in Tata Sons, has about Rs 20,000 crore in liabilities.

In 2020, Tatas objected to pledged shares and even filed a motion with the Supreme Court to restrict Mistry Group from raising funds by directly or indirectly pledging shares. In its order, the Supreme Court said the parties must resolve the issue. Later, SP Group promised nearly half of the shares of Tata and his son, and the Tata family did not object.

If this can be called a precedent, industry insiders believe that SP Group can raise funds by pledging shares.

“Funding will be raised in the short term, and the group is in talks with several financial institutions. The aim is to reduce debt and inject cash into the operating company. This will be repaid from operating profits and asset monetisation when required. The idea is to Time will bring the debt down to an appropriate level,” said an official with knowledge of the development.

“Furthermore, monetisation of certain assets through equity sale will also be considered. Two years ago, SPCPL’s debt was Rs 37,000 crore, which has been brought down to the current level through various initiatives,” he said.

SP Group officials declined to comment on the fundraising plans. The group had earlier pledged to sell almost 9% of its 18.37% stake in Tata Sons.

Earlier in April 2022, SP Group exited the one-off resolution (OTR) scheme by paying Rs 12,450 crore to lenders by selling assets, including Sterling Wilson Renewable Energy and Eureka Forbes monetisation. The group raised Rs 3,750 crore through monetisation, while the Mistry family injected Rs 5,100 crore into SPCPL, with the balance coming from the group’s internal accruals.

In April 2021, the KV Kamath Council approved the group’s OTR package after the Covid-19 pandemic hit its business. As part of the OTR, the group has agreed to sell assets and repay the debt by March 31, 2022.

In October 2021, the group raised Rs 2,845 crore by selling a 40% stake in the group company Sterling & Wilson Solar (SWSL) to Reliance New Energy Solar, a wholly-owned subsidiary of Mukesh Ambani-controlled Reliance Industries. In September 2021, SP Group sold a majority stake in its Eureka Forbes branded consumer durables business to US-based private equity fund Advent International for Rs 4,400 crore. SP Group has used the proceeds of these sales to reduce debt.