Key Highlights

• Shapoorji Pallonji secures record-breaking $3.4 Billion private credit deal in India's booming infrastructure sector.
• Private credit market in India surges with $9.2 Billion deals in 2024, attracting global and sovereign wealth investors.
• Despite risks, high 19.75 percent yield draws investor interest in Shapoorji’s Tata Sons-linked financing structure.

The Indian real estate and construction company Shapoorji Pallonji has broken the country’s record after securing $3.4 billion in private financing for a project. Those who invest in the transaction get a high 19.75 percent yield, a low loan-to-value ratio and a rare chance to invest major capital in one of the world’s most rapidly growing markets.

Still, the small print points out a number of things that could go wrong. The main asset in the deal is Shapoorji’s $18 billion involvement in private shareholder Tata Sons. However, it is unsure if the company can transfer its stakes, since the boards can restrict their sharing and fights among the two families top the headlines. Besides, at least one of the entities listed in the option has been warned to expect tighter capital requirements soon. The Reserve Bank may soon reclassify the entity and increase its required amount of capital to 15 percent. A loan’s interest rates could go up if the company misses its deadline or does not request an extension, says the Bloomberg-reviewed term sheet.

There are wider doubts about Shapoorji’s approach such as whether it will follow through on plans to have its real estate arm listed.

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That Shapoorji was nonetheless able to win the deal highlights the surge in the private credit market here, thanks to the government’s huge focus on infrastructure. Private credit transactions worth $9.2 billion were recorded in the market last year, representing a 7 percent rise compared to the year before, said Ernst & Young. Kotak Alternate Asset Managers are getting ready to launch multibillion-dollar funds, but firms such as KKR and Goldman Sachs are also on the hunt for suitable deals. As Bloomberg revealed, investors linked to the Indian government and Middle Eastern sovereign wealth funds are starting to invest more.