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SP Group Receives Porteast NCD Holders’ Consent to Reduce Tax Leakage to 14.3% From 17.5%

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Shapoorji Pallonji Group or SP Group, has received consent from holders of its Porteast Investment Pvt. Ltd non covertible debenture, or NCDs, to reduce the tax leakage applied to the gross portfolio value of its 9.185% stake (half of a total 18.4% stake) in Tata Sons to 14.3% from 17.5%,two sources familiar with the development said.

No consent fee was offered, one of the sources said.

The Porteast NCD has a 34% loan-to-value, or LTV, cap, which as reported, was close to be breached if the tax leakage was left at 17.5%.

The LTV denominator is the gross portfolio value of Tata Sons. This value consists of the sum of the Tata group’s listed and unlisted subsidiaries, minus its debt. An illustrative calculation in the Porteast trust deed applies a 17.5% tax leakage to this gross portfolio value to arrive at the net portfolio value. If the LTV breaches 34% for five consecutive trading days, Porteast will have five business days to bring the ratio down to 26% or below. Read Octus’ analysis here.

Reducing the tax leakage would lower the LTV, which has been increasing year-to-date. The LTV was 33.6% on Monday, based on our March 9 update. Without the 17.5% tax leakage, the LTV would be 27.7%.
The engineering to real estate conglomerate sought consent from the Porteast NCD holders to reduce the tax leakage number in line with “extant tax regulations”, the first source familiar said. While the NCDs issued by the Goswami Infratech unit, which mature April 30, 2026, have a similar LTV mechanism, it did not apply tax leakage to calculating the net portfolio value, source said.

Goswami NCDs Refi

A reduction in the tax leakage number may provide some reprieve to SP Group which is planning to issue an up to $750 million public three-year non-call for one year dollar bonds and INR 193.9 billion in NCDs to refinance the Goswami NCDs as well as for general corporate purposes, the sources said.

The Goswami Infractech NCDs largely mirror the Porteast due 2028: both are collateralized by Tata Sons shares, have high-cost PIK coupons, and require partial debt paydowns funded by asset sales.

Deutsche Bank, the sole arranger for both the USD and INR tranches, is meeting investors in Hong Kong this week for bookbuilding, the same sources said, adding that the bank held meetings with fixed income investors in Singapore last week. Deutsche Bank is targeting new investors including global bank and public fixed income investors to reduce the pricing from 21.75% all-PIK, the sources said.

Shapoorji Pallonji did not respond to requests for comment.

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