Despite severe transfer restrictions on Shapoorji Palonji Group’s (SPGs) equity holding in Tata Sons, ICRA has reaffirmed its AA+ and A1+ rating to group’s fund and non-fund based total limits of around ₹16,000 crore.
ICRA’s ratings are based mainly on SPGs holding in Tata Sons, the agency said. SPG group is trying to raise cash to cut down debt in the group.
A spat between Cyrus Mistry and Ratan Tata and a legal battle that followed resulted in restrictions on SPG’s holding in Tata Sons. Mistry family owns 18.4 per cent equity in Tata Sons and derives an estimated $16.7 billion of its fortune from the holding. But Mistry family cannot sell its stake in Tata Sons without prior approval from Tata Sons board.
Besides Mistry family’s holding in Tata Sons, ICRA said it took into account strong inflow of orders in the company’s core construction business over the last two fiscals resulting in a well-diversified order-book position which provides revenue visibility in the near to medium term.
Borrowing levels up
ICRA said its ratings were constrained by the increase in the company’s standalone borrowing levels, due to the high working capital intensity in the construction business and increase in investments and loans to group companies, which have resulted in high gearing levels and modest debt coverage metrics.
Also, the company has sizeable contingent liabilities on account of financial, performance and debt service reserve account (DSRA) guarantees given on behalf of group companies, especially in the real estate sector where the projects are in initial stages of development. Timely progress on these projects remains important in order to reduce their dependence on SPCPL’s support and also to achieve meaningful returns that can be up streamed to support the company’s efforts to de-leverage its standalone balance sheet.
Stake sale in solar arm
Reportedly, the SGP group is planning to seek about $1 billion by bringing outside investors into its solar unit to reduce debt. The group may sell as much as 30 per cent in the solar engineering arm of Sterling & Wilson.
The funds will be raised through a pre-listing stake sale followed by a public offering.