Power Finance board approves Rs 15,000 crore loan to Shapoorji Pallonji group: Report

PFC approves a Rs 15,000 crore loan to Shapoorji Pallonji Group, aiding the Mistry family in repaying debts. The loan is backed by real estate cash flows and Tata Sons shares.

The board of Power Finance Corporation (PFC) has approved a Rs 15,000 crore loan to companies within the Shapoorji Pallonji (SP) Group, according to a news report in The Economic Times.

This loan will assist the Mistry family, who hold an 18.37 percent stake in Tata Sons, in repaying promoter debts and fulfilling commitments to creditors.

Moneycontrol too had earlier reported, citing people aware of the matter,  that Power Finance Corp (PFC) had received approval from legal advisors for the loan.

This approval comes as the Mistry family's operating companies like the Shapoorji Pallonji Limited and Afcons are in expansion mode, including a proposed public issue for Afcons. The Tata Trusts had expressed concerns over the use of Tata Sons shares as collateral. However, PFC's legal team has confirmed the feasibility of using unlisted shares for securing loans.

The loan will be backed by cash flows from SP Group's real estate business and the Mistry family's shares in Tata Sons, the report said. It is expected to have a four-year term, with provisions to cover interest costs for the first two years. The loan will be disbursed to two special purpose vehicles (SPVs) set up by the Mistry family, which will use the funds to pay off bondholders.

These SPVs will hold the family's real estate shareholdings, and PFC will have a lien on their bank accounts, giving it access to dividends and potential sale proceeds.

PFC, the largest non-banking finance company in India, reported its highest annual consolidated profit of Rs 21,179 crore for 2023-24. This loan is seen as a significant step in addressing the Mistry family's $3 billion debt, potentially allowing their companies to reinvest profits for growth instead of servicing debt .