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Shapoorji Pallonji Group's real estate arm, Goswami Infratech, may face higher borrowing costs as it plans to raise up to INR 250 billion through a two-year zero-coupon bond issue. Investor expectations have shifted after yields on bonds issued by another group unit, Porteast Investment, rose sharply following a covenant breach. The funds are intended to refinance debt maturing in April and meet other corporate needs. The bond sale, initially expected to close soon, may now be delayed until March.
India's Shapoorji Pallonji Group is likely to encounter higher interest costs as it prepares to raise fresh funds through its real estate and civil engineering arm, Goswami Infratech, according to people familiar with the matter. The development follows a recent rise in borrowing costs for another group entity, which has shaped investor expectations. Advertisement
Goswami Infratech plans to raise up to INR 250 billion through a two-year zero-coupon bond issue expected to be launched in the coming weeks. The fundraise is aimed at refinancing existing high-yield notes due to mature in April, along with another loan, and to meet other debt-related and corporate requirements.
Initial discussions with investors indicated that they were seeking returns comparable to those offered in a recent bond sale by Porteast Investment, another Shapoorji Pallonji Group unit. Porteast had earlier raised INR 286 billion through a three-year bond issuance, the largest corporate bond sale in India to date, at an interest rate of 19.75%. However, the yield on those bonds rose to 21.75% later after the company did not meet a covenant linked to a stake sale in another business.
With yields on Porteast's debt now higher, investors are reportedly expecting similar returns from Goswami Infratech's proposed issue. People aware of the discussions said this shift in expectations could push up Goswami Infratech's borrowing costs and complicate the fundraising process.
The company is currently reviewing its options, and the bond sale may take longer to complete than initially planned. Bankers had earlier expected the transaction to close this month, following meetings with global investors such as Pacific Investment Management Co, BlackRock and Vanguard. However, the timeline may now be extended, with the issuance potentially moving to March.
The proposed bond issue will be secured against the Shapoorji Pallonji Group's 9.2% stake in Tata Sons, which is held through its subsidiary, Cyrus Investments. The group did not respond to queries seeking comment on the fundraising plans.
Source Reuters
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