The Shapoorji Pallonji Group (SP Group) has endured a tough few years, mostly due to huge debt in its real estate industry. This figure was over Rs 37,000 crore at the start of FY22 and was decreased by roughly Rs 13,500 crore during the year to close at slightly under Rs 23,500 crore.
During the previous fiscal year, it had to sell several of its assets, including Eureka Forbes and Sterling & Wilson. Shapoor and Cyrus Mistry, brothers, were in charge of the group’s enterprises. With the latter having died in a vehicle accident on Sunday and being the one pushing many of the critical debt-reduction initiativ+es, the road ahead appears to be difficult.
The group’s primary businesses include engineering and construction, infrastructure, oil and gas, EPC, water, and energy. Last year, Advent International purchased Eureka Forbes, a business known for its vacuum cleaners and water purifiers. According to group insiders, the magnitude of the firm’s overleverage became clear when there was little money remaining to invest in other enterprises.
“Real estate was a huge problem and there has been constant pressure from banks to reduce it,” one person says. The decision to sell Eureka Forbes (the promoters received Rs 3,100 crore for their 72.56 percent stake) was made as part of a one-time restructuring of a Rs 10,900 crore debt under the Covid-19 relief framework. Banks settled this portion of the total debt of about Rs 22,000 crore in March. It has also been publicly known for some time that the group is trying to sell a portion or all of its holdings in Afcons Infrastructure and other group entities.
Just a month after the Eureka Forbes transaction, another group firm, Sterling & Wilson, agreed to sell out to Reliance New Energy Solar for Rs 2,850 crore, or Rs 375 per share, and at a 14% discount to the market price.
All eyes will now be on Afcons Infrastructure, the group’s building company. According to its annual report, this company reported consolidated sales of Rs 9,521 crore in FY21, compared to Rs 10,131 crore the previous fiscal. Net profit fell from Rs 246 crore to Rs 167 crore.
Offshore oil and gas, bridges and flyovers, maritime works, road building, hydro and tunnels, pipe laying, and general civil engineering works are all areas in which it operates. Forbes & Co, Sterling & Wilson (which has the EPC business), SP Engineering & Construction, SP Oil & Gas, and SP Real Estate are all part of the group.