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Afcons to repay SBI loan instead of Shapoorji Finance
ECONOMY & POLICY

Afcons to repay SBI loan instead of Shapoorji Finance

Shapoorji Pallonji group’s flagship construction firm Afcons Infrastructure, has dropped its plans to use part of its IPO proceeds to repay a loan taken from a related party - Shapoorji Pallonji Finance - which is categorised as part of the promoter group of Afcons. The change came after the company received observations on its draft red herring prospectus from markets regulator Securities and Exchange Board of India (SEBI) and the stock exchanges.

In the case of Afcons, SEBI raised concerns about the appropriateness of using IPO proceeds to repay a loan to SPCPL. Faced with SEBI’s concerns, Afcons made a strategic decision to drop its plan – a move that can be seen as a proactive measure to ensure compliance with regulatory expectations and to maintain investor confidence ahead of its IPO. By retracting the loan repayment plan, Afcons is signalling its commitment to transparency and responsible corporate governance.

As part of plans outlined in the draft red herring prospectus filed on 28 March, Afcons had proposed that it will use fresh proceeds of the IPO to repay a Rs 1 billion financing facility led by Central Bank of India along with Shapoorji Pallonji Finance in a co-lending arrangement where the Central Bank of India has a 75 percent share and Shapoorji Pallonji Finance has a 25 percent share. The loan was taken in July 2023 for working capital requirements and for payment to vendors and carries an interest rate of 10.95 percent. Out of the total fresh proceeds of Rs 12.5 billion proposed to be raised from the IPO, the biggest chunk of Rs 5 billion was reserved for repayment of certain loans availed of by Afcons. Apart from its promoter group company, other lenders that are proposed to be repaid from the IPO proceeds include State Bank of India, DBS Bank and HSBC. Following the SEBI observations, the Rs 1 billion earlier earmarked for Shapoorji Pallonji Finance loan has now been reallocated towards repayment of loans of similar amount from State Bank of India.

The flagship infrastructure engineering and construction company of the Shapoorji Pallonji group has, over the last 10 years, completed 76 projects across 15 countries with a total historic executed contract value of Rs 522.2 billion. As of 30 September 2023, Afcons, which is known for its expertise in executing complex projects across various domains, including marine, highways, bridges, tunnels, and metros, has 67 active projects across 13 countries, aggregating to an order book of Rs 348.88 billion. Some of the major projects executed by Afcons include the Chenab Bridge in Jammu and Kashmir, Atal tunnel in Himachal Pradesh and the Mahatma Gandhi Setu bridge in Bihar.

Shapoorji Pallonji group’s flagship construction firm Afcons Infrastructure, has dropped its plans to use part of its IPO proceeds to repay a loan taken from a related party - Shapoorji Pallonji Finance - which is categorised as part of the promoter group of Afcons. The change came after the company received observations on its draft red herring prospectus from markets regulator Securities and Exchange Board of India (SEBI) and the stock exchanges. In the case of Afcons, SEBI raised concerns about the appropriateness of using IPO proceeds to repay a loan to SPCPL. Faced with SEBI’s concerns, Afcons made a strategic decision to drop its plan – a move that can be seen as a proactive measure to ensure compliance with regulatory expectations and to maintain investor confidence ahead of its IPO. By retracting the loan repayment plan, Afcons is signalling its commitment to transparency and responsible corporate governance. As part of plans outlined in the draft red herring prospectus filed on 28 March, Afcons had proposed that it will use fresh proceeds of the IPO to repay a Rs 1 billion financing facility led by Central Bank of India along with Shapoorji Pallonji Finance in a co-lending arrangement where the Central Bank of India has a 75 percent share and Shapoorji Pallonji Finance has a 25 percent share. The loan was taken in July 2023 for working capital requirements and for payment to vendors and carries an interest rate of 10.95 percent. Out of the total fresh proceeds of Rs 12.5 billion proposed to be raised from the IPO, the biggest chunk of Rs 5 billion was reserved for repayment of certain loans availed of by Afcons. Apart from its promoter group company, other lenders that are proposed to be repaid from the IPO proceeds include State Bank of India, DBS Bank and HSBC. Following the SEBI observations, the Rs 1 billion earlier earmarked for Shapoorji Pallonji Finance loan has now been reallocated towards repayment of loans of similar amount from State Bank of India. The flagship infrastructure engineering and construction company of the Shapoorji Pallonji group has, over the last 10 years, completed 76 projects across 15 countries with a total historic executed contract value of Rs 522.2 billion. As of 30 September 2023, Afcons, which is known for its expertise in executing complex projects across various domains, including marine, highways, bridges, tunnels, and metros, has 67 active projects across 13 countries, aggregating to an order book of Rs 348.88 billion. Some of the major projects executed by Afcons include the Chenab Bridge in Jammu and Kashmir, Atal tunnel in Himachal Pradesh and the Mahatma Gandhi Setu bridge in Bihar.

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