Noel Tata's Rise Increases Demand for SP Group Bonds
Interest in SP Group bonds is increasing, and bankers expect more transactions in the near future.
The SP Group also plans to list its engineering subsidiary, AFCONS, and its real estate division in the next few years.
The Shapoorji Pallonji (SP) Group recently had its credit rating lowered by CARE Ratings. It went from "Care BB" to "Care BB-."
Despite this downgrade, interest in its bonds is rising.
This increase in demand follows Noel Tata's appointment as chairman of Tata Trusts. Tata Trusts holds a significant stake in Tata Sons.
Goswami Infratech Private Ltd (GIPL), part of the SP Group, is getting a lot of interest in its zero-coupon bonds, especially from domestic wealth management firms.
Investors are hopeful that Noel Tata's leadership will help improve the strained relationship between the Tata Group and the SP Group.
This tension has existed since Cyrus Mistry was removed in 2016.
Noel Tata is married to Aloo Mistry, Cyrus Mistry’s sister, which further connects the two groups.
His appointment comes after Ratan Tata’s recent passing.
GIPL’s bonds, rated “BB-,” were listed in June 2023 with an attractive 18.75% interest rate, but they’re currently trading at a discount due to worries about the SP Group’s debt situation.
The downgrade was mainly because of worries about paying back loans and delays in refinancing.
To handle this, GIPL has delayed an ₹1,800 crore interest payment.
Investor Confidence
Noel Tata's new role has sparked optimism, with many believing that tensions between the Tata and SP Groups may start to ease.
This has increased confidence among investors, especially regarding the SP Group’s 18% stake in Tata Sons, which is being used as collateral for loans.
Interest in SP Group bonds is increasing, and bankers expect more transactions in the near future.
Looking Ahead
The SP Group has financial challenges, but there's cautious optimism.
If its relationship with the Tata Group improves, it could help the SP Group manage its finances better.
One option could be selling part of its stake in Tata Sons to relieve some financial pressure.
The SP Group also plans to list its engineering subsidiary, AFCONS, and its real estate division in the next few years.
This could create significant value and improve the group’s finances without needing to sell its stake in Tata Sons.
