The Shapoorji Pallonji group has raised ₹21,350 crore through the issuance of non-convertible debentures, marking a significant shift in the landscape of private credit deals in India. This transaction enables companies to explore alternative funding options, with the group entities utilizing the funds for refinancing existing debt and capital requirements. The development affects companies in the infrastructure and construction sectors, particularly those seeking large-scale funding.

Full News Breakdown

The Shapoorji Pallonji group raised ₹21,350 crore by issuing unrated, unlisted, secured, zero coupon, redeemable non-convertible debentures of Eqyizen Investment Private Limited.

• The INR NCDs were secured by part of SP groups’ shareholding in Afcons Infrastructure Limited and 50% of SP group’s shareholding in Tata Sons Private Limited.

• Desai & Diwanji advised Eqyizen Investment on this NCD issuance.

• A&O Shearman acted as the English legal counsel for Eqyizen Investment.

• TT&A advised Deutsche Bank A.G, which served as the coordinating bank on the NCD issuance.

• Linklaters acted as the English legal counsel for Deutsche Bank A.G on these transactions.

• Appleby acted as the Mauritian legal counsel for Mercury Finance Company.

How Does This Affect You?

The Shapoorji Pallonji group's successful fundraise clarifies the potential for bespoke financing structures. Companies can now explore alternative funding options, reducing reliance on traditional debt instruments. This shift affects various industries, and companies must reassess their funding strategies.

For Lawyers & Advocates

The use of non-convertible debentures as a financing tool creates a compliance obligation for lawyers to review drafting and due diligence processes, particularly in securing such instruments, as per the Companies Act, 2013, and the Securities Contracts (Regulation) Act, 1956. Lawyers advising on private credit deals may wish to consider the potential for bespoke financing structures, such as combining INR non-convertible debentures and USD bonds, to optimize client funding strategies. The involvement of multiple jurisdictions and legal counsel in this transaction highlights the importance of coordination and communication in cross-border deals, necessitating a review of the Indian Contract Act, 1872. The role of coordinating banks and placement agents in facilitating large-scale private credit deals may become more prominent, and lawyers may find it useful to advise on these aspects and review compliance with the Reserve Bank of India's regulations. The security package, including shareholding in prominent companies, may set a precedent for future transactions, and lawyers may want to consider the implications under the Securitisation and Reconstruction of Financial Assets and Enforcement of Security Interest Act, 2002.

For Law Students

The Shapoorji Pallonji group's successful fundraise provides an opportunity to examine the application of secured financing and debt capital markets in achieving large-scale funding objectives. The core legal doctrine relevant here is the use of non-convertible debentures as a financing tool, governed by the Companies Act, 2013. The decision is particularly relevant for the study of Corporate Law and Financial Regulations, Secured financing and debt capital markets, the role of coordinating banks and placement agents in private credit deals, and the implications of bespoke financing structures on company capital structures. Comparable cases include Sahara India Real Estate Corporation Ltd. vs. SEBI, 2012, and IDBI Trusteeship Services Ltd. vs. Hubtown Ltd., 2017, which highlight the regulatory framework for securities and financing.

For Businesses

Companies in the infrastructure and construction sectors may want to consider alternative financing options like non-convertible debentures to optimize their capital structures and reduce reliance on traditional debt instruments. Boards of companies may find it useful to review their funding strategies and weigh the benefits of bespoke financing against traditional debt instruments, taking into account the Companies Act, 2013, and the Securities Contracts (Regulation) Act, 1956. CFOs may wish to review internal documentation and filing processes to ensure compliance with regulatory requirements for private credit deals, including those under the Reserve Bank of India's regulations. Companies may want to consider the potential impact of large-scale private credit deals on their credit ratings and overall financial health, taking into account the provisions of the Securitisation and Reconstruction of Financial Assets and Enforcement of Security Interest Act, 2002.

Key Takeaways

• The legal principle established is that bespoke financing structures, including non-convertible debentures, can be used to raise large-scale funds in India, as per the Companies Act, 2013.

• The practice consequence is that lawyers may find it useful to advise clients on the potential for alternative financing options and the importance of securing such instruments, reviewing compliance with the Securities Contracts (Regulation) Act, 1956.

• The enforcement consequence is that regulators will likely scrutinize the use of non-convertible debentures and other bespoke financing structures to ensure compliance with securities laws and regulations, including those under the Reserve Bank of India's regulations.

• What to watch next is the Reserve Bank of India's and the Securities and Exchange Board of India's responses to the growth of private credit deals and the potential for regulatory changes, which may impact the applicability of the Securitisation and Reconstruction of Financial Assets and Enforcement of Security Interest Act, 2002.

• CFOs of infrastructure and construction companies may want to review their funding strategies to consider alternative financing options, taking into account the Companies Act, 2013, and the Securities Contracts (Regulation) Act, 1956.

References

1. Companies Act 2013 - S Lohia & Associates

2. India Code: Securities Contracts (Regulation) Act, 1956

3. A Comprehensive Guide to The Indian Contract 1872 and Legal Drafting

4. Reserve Bank of India (RBI) | Functions, Organization, & Governors | Britannica Money

5. SEBI (Securities and Exchange Board of India)

6. Sahara India Real Estate Corporation Ltd. and Ors. Vs. ...

7. cites: 157626988

8. Supreme Court Observer - A living archive of the Supreme ...

Source: Shapoorji Pallonji group closes ₹21,350 crore fundraise; Desai & Diwanji, TT&A advise