SP Group to issue Rs 25,500 crore bonds against Tata Sons stake

Its terms require that within 18 months of the issue, either Tata Sons announces an initial public offering (IPO), or SP Group reaches a settlement with the Tata holding company on its ownership.

“The bond’s terms themselves acknowledge that monetisation of the Tata Sons stake is central to repayment,” said a banking industry official. “Central bank clarifications on indirect public funds and asset-based classification of NBFCs increase the likelihood of a Tata Sons listing, which, while not guaranteed, provides incremental comfort on SP Group’s ability to monetise its biggest asset over time.”

Last Wednesday, the central bank implemented a new definition for systemically important non-banking financial companies, called upper-layer NBFCs, bringing such entities with assets exceeding ₹1 lakh crore under the umbrella that requires mandatory public listing of shares. The move appears to have all but shut the door for the parent of the country’s largest business group to remain privately held.

Tata Sons, with an asset base of more than ₹1.75 lakh crore, was classified as an NBFC-UL on the asset-based framework that replaced a complex metric. The company’s majority owner, Tata Trusts, earlier passed a resolution saying Tata Sons should remain unlisted. Two of its vice chairmen-Venu Srinivasan and Vijay Singh-have subsequently said in public statements that a listing would be a positive outcome.

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Repayment based on either Tata Sons listing, or settlement between both groups

Clarity on ‘Public’ Funds
Their public comments have become a source of discord among trustees, including chairman Noel Tata, who has firmly opposed a listing. In the revised NBFC-UL framework, RBI has clarified that indirect public funds include money received through associates and group entities that themselves have access to public funds.

The clarification removes the scope for companies to argue they are outside the definition of public funds merely because group companies who invested in them did not borrow debt for such investment. The clarification comes a week after RBI briefly omitted the definition from its June 24 revised NBFC-UL framework before restoring it in the updated circular effective July 1.“RBI had also clarified this issue in FAQs dated April 29 that if a group company has invested in an NBFC and it has access to public funds, then such an NBFC will be considered to have access to public funds,” said an investor in the existing series of SP Group bonds.

Tata Sons meets this criterion as group companies have access to public funds invested in Tata Sons rights issue, said this investor. SP Group will likely pay 18.95% for the series of bonds to primarily refinance existing debt. “The bond issue will be launched on Monday, with settlement likely in the following week,” said a person familiar with the development. A spokesperson at SP Group did not respond to ET’s mailed requests for a comment.

‘DELEVERAGING’ TARGETS
The zero coupon, unlisted and unrated non-convertible debentures (NCDs) will be issued by Eqvizen Investment, while Cyrus Investments will pledge Tata Sons shares as collateral.

The financing also includes a deleveraging covenant requiring repayment of at least Rs 13,500 crore within 24 months of issuance. Failure to meet the repayment obligation would constitute an event of default, providing investors with additional safeguards.

The issue is part of SP Group’s refinancing exercise against its Tata Sons stake, including borrowings raised by Goswami Infratech. The refinancing, originally targeted for completion by the end of April, was delayed to July after market volatility triggered by the US-Iran conflict disrupted execution, prompting the group to seek additional time from creditors as debt maturities approached.