Ex-SoftBank biggie looks to bet big on Shapoorji Group

Mumbai: A former trader who had transformed Japan’s SoftBank into the world’s then biggest-and, probably, somewhat controversial-technology investor through his support to some disruptive startup founders across the globe, Rajeev Misra is now looking to double down on a storied old-economy conglomerate, the Shapoorji Pallonji Group, as part of India’s biggest local currency private debt deal, people familiar with Misra’s plans told ET.

Misra’s latest India bet, as part of a structured credit transaction involving multiple global bulge-bracket funds, will back Shapoorji Group‘s tactile and capital-hungry businesses in sectors as diverse as construction, real estate, and physical infrastructure. For Misra, a deal would also mean a second-and bigger-exposure to the nearly 160-year-old and highly leveraged group that is a major shareholder in the closely held Tata Sons.

His two-year-old, $8-billion venture One Investment Management (OneIM)-backed by Royal Group of Sheikh Tahnoon bin Zayed al Nahyan, who is also the UAE’s national security adviser, and Mubadala Investment Co, one of the Emirate’s sovereign wealth funds -is in advanced talks to join a consortium of global private credit funds negotiating with Shapoorji Group that wants to raise $3.3 billion.

Several Funds to Make India Debut
The proceeds will primarily be used to refinance existing debt that was raised against the Shapoorji Group’s 18.2% ownership of Tata Sons shares.Apart from Misra’s fund, the new financing deal involving three-year, rupee-denominated, non-convertible debentures (NCDs), will also see several global financial groups make a debut in India. These include Atlanta-based Broadpeak Capital, South Korea’s Meritz Financial Group, King Street Capital Management, said the people mentioned above.

Each of them would look to invest anywhere between $100 million and $200 million.

In 2023, Misra had taken a smaller wager on Shapoorji Group, when it raised ₹14,300 or close to $2 billion from private credit investors and high networth individuals, pledging another tranche of Tata Sons shares as collateral. Misra said in an interview the investment conglomerate is getting 20% Indian rupee interest for two years on the debt, and if hedged back into dollars, the rate is 17%.

In its December 2 edition, ET had reported that SP Group was all set to kickstart the fundraise and existing investors including Ares SSG and US hedge fund Farallon may also participate in the new round. Subsequently, on January 13, ET reported the group had increased its fundraising target to $3.25 billion.

Refinancing Needs
Shapoorji Group promoter entity Sterling Investments (SIPL) had raised $2.6 billion from Ares and Farallon in 2021, pledging a 9.1% stake in Tata Sons and some real estate assets.

These high-cost NCDs, priced at 18.75%, are due to mature in March 2025, requiring the group to arrange for refinancing.

After nearly year-long negotiations with Power Finance Corp (PFC) to raise almost ₹20,000 crore failed last November, the group was forced to return to the private markets for its refinancing needs. The state-run PFC had pulled out due to high exposure risks. Deutsche Bank is the sole bookrunner.

Spokespersons at Shapoorji Group, OneIM, Broadpeak, and Meritz Group did not respond to ET’s emailed queries. King Street declined to comment.

Even after a string of asset and business unit sales and initial equity offerings of various group companies, leverage has been an issue for the SP Group. Earlier this week, credit rating agency ICRA noted in the medium term, on the backdrop of subdued performance in the EPC business and inadequate bank funding lines, the Shapoorji Group will continue to face stretched liquidity and weakened debt coverage metrics. This was despite the group’s known execution capabilities in key businesses like real estate and EPC. It had an adequate order book of ₹27,664 crore as on September 30, 2024.The final negotiation over yields is getting aggressive, said an official involved, adding that there is even a thought process among some quarters to upsize the fundraise to involve $4.5 billion to refinance the entire sum raised against their cumulative Tata Sons shareholding. But no final decision has yet been taken.

However, talks are still underway and there is no guarantee that it will result in a transaction.

Merrill, UBS, Deutsche
Prior to SoftBank, Misra had stints in Deutsche Bank, UBS AG and Merrill Lynch. As the co-CEO of the $100-billion Vision Fund, Misra backed disruptors as varied as Uber, WeWork, Klarna and Didi Global as well as Flipkart, Delhivery, Meesho and Ola Electric.

The hot shot SoftBank executive parted ways with Masayoshi Son after an eight-year stint, following an underwhelming performance of the Vision Fund and clashes with several of his senior SoftBank peers.

OneIM has been seeking further capital commitments from investors to push into structured credit as part of a strategy to generate double-digit returns, Bloomberg had reported in September 2023.

The Shapoorji Group’s debt rose to ₹45,000 crore in March 2020 due to high-cost construction projects and working capital shortage during the Covid pandemic and the IL&FS blowout.

The group opted for a one-time resolution (OTR) offered by the Reserve Bank of India (RBI) that year to address its debt. The group exited the OTR plan by March 2022, repaying ₹12,450 crore to lenders-in what was to be the largest OTR in the country and was the first to be fully repaid within a year.

The group debt came down to Rs 19,724 crore on March 31, 2024, after it divested Gopalpur Port, Eureka Forbes, stakes in Sterling & Wilson and sold shares for the first time in Afcons.

Even then, the group’s credit rating has remained negative. The credit agency CareEdge maintained a ‘BBB-‘ rating in its October 2024 estimates.