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The 155-year-old Shapoorji Pallonji Group has outlined a slew of initiatives, which includes selling off some infra and road assets, in an effort to reduce its debt by ₹1,000 crore.
“Further debt reduction in the current financial year will be by sale of Shapoorji Pallonji infrastructure assets, which includes solar, roads and ports, some real-estate assets and potential floatation or strategic sale of Eureka Forbes, amongst other initiatives have been outlined,” according to company sources.
On April 27, SP Infra, a group company of Shapoorji Pallonji, announced that it is selling its five operational 317 MW capacity solar energy assets to investment major KKR. With the sale of the solar assets, debt has been reduced by over ₹1,600 crore.
“The proceeds of this sale will be primarily applied towards debt reduction and towards funding the group’s under-construction solar projects,” said a company spokesperson.
Being privately held, the company has not shared the details of the under-construction solar projects. However, Sterling and Wilson Solar Ltd (SWSL), one of its group companies, is listed and is into solar Engineering Procurement Construction (EPC) projects.
SP Infra’s deal with KKR is expected to accelerate the pace of reduction of SP Group’s debt, which had ballooned to ₹9,000 crore. Shapoorji embarked on a debt-reduction drive as market liquidity got tighter and its core business witnessed a slowdown. During FY20, despite tight market conditions, various SP Group companies managed to lock in asset monetisation worth over ₹4,200 crore, the spokesperson said.
The net worth of Shapoorji Pallonji and Company Pvt Ltd (SPCPL), which is the group holding company, grew 70 per cent over the past two years. Net worth indicates the value of a company, and consists primarily of all the money invested since its inception, as well as the retained earnings for the duration of its operation. Further, SPCPL’s contingent liability reduced by ₹2,700 crore in the last 15 months.
Capital diversification
The Shapoorji Group has also undertaken a capital-diversification strategy, and the Mistry family, promoters of SP Group, has infused ₹4,300 crore over the past two years to strengthen the group’s balance sheet. “We have been successful in diversifying its sources of capital, with a significant reduction in short-term debt exposure,” the spokesperson daid.
The group’s mutual fund exposure has sharply declined by over 77 per cent over the last two years. Companies adopt diversification as a risk management strategy, and a diversified portfolio contains a mix of distinct asset types and investment vehicles in an attempt to limit exposure to any single asset.
Additionally, SP Group claims that its construction order book, in excess of ₹1.1-lakh crore as on March 20, is a historic high. The real-estate arm of the group also grew in a tough market, recording sales of over 3,300 apartments and improving collections by 60 per cent year on year, the spokesperson said.
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