Shapoorji Pallonji Gets Closer To Using Tata Sons Shares As Collateral For ₹15,000 Cr Loan To Pay Off Personal Debts

The Shapoorji Pallonji Group is reportedly looking to take on a massive loan by putting up its stake in Tata Sons as collateral amid legal doubts voiced by the latter.

What Happened: State-run Power Finance Corporation (PFC) has sanctioned a ₹15,000 crore loan to the Shapoorji Pallonji group, a move set to significantly aid the Mistry family in managing their financial obligations, Economic Times reported, citing sources.

The Mistry family, which holds an 18.37% stake in Tata Sons, will use this loan to repay personal debts and fulfil commitments to creditors of their operating companies, sources told the Business Daily.

The loan will be backed by the cash flows from SP group’s real estate business and the Mistry family’s shares in Tata Sons. The loan term is expected to be four years, including additional funding to cover interest costs for the first two years. A formal sanction letter with specific conditions is anticipated soon.

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Long Time Coming: Earlier, the Mistry family had approached Deutsche Bank and PFC for a loan to pay off expensive bonds issued to global credit funds. These bonds, secured by Tata Sons shares, were due for redemption this month but have been extended to September with bondholders’ consent.

The PFC loan will likely be disbursed to two special purpose vehicles (SPVs) created by the Mistry family. These SPVs will use the loan to settle bondholder debts and will house the family’s real estate shareholdings. PFC will maintain a lien on the SPVs’ bank accounts, providing access to dividends from the real estate business and potential proceeds from any stake sales.

Serious Doubts: Tata Trusts, the majority shareholder of Tata Sons, has previously expressed concerns about using the company’s shares as collateral for the loan. According to Tata Trusts’ CEO Siddharth Sharma, these shares are not freely transferable. PFC, however, has taken a legal stance that unlisted shares can be used as security for loans, a practice previously accepted by other lenders.

The loan from PFC could provide the Mistry family with much-needed flexibility, allowing their operating companies to reinvest profits rather than using them to service personal debts. The SP group is also pursuing debt reduction through asset monetisation, including the recent sale of a port in Odisha to the Adani Group and the planned IPO of Afcons Infrastructure, which could raise about ₹5,000 crore.

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Posted In: NewsMarketsPower Finance CorporationShapoorji Pallonji GroupTata GroupTata Sons