Axis Trustee Seeks Bondholders’ Consent for Pledge Release Ahead of Afcons IPO

Key Takeaways:

1. Goswami Infratech Pvt Ltd (GIPL) raised Rs 14500 crore in bonds with a covenant that the yields on the bonds would increase by 2% if the company failed to monetize Afcons before June 2024.

2. Axis Trustee, the debenture trustee of GIPL, has sought bondholders’ consent to release the pledge on shares of Afcons Infrastructure, a Shapoorji Pallonji company, to proceed with an initial public issue.

3. The trustee has also requested approval to increase the authorized share capital of Afcons.

4. Afcons is exploring fresh issuance of equity up to Rs 1500 crore and an ‘offer for sale’ of equity shares through a book-building process, with the proceeds intended to repay existing debt.

Synopsis:

Debenture Trustee Seeks Waiver on Bond Terms for Shapoorji Pallonji’s Afcons Proposed IPO

Goswami Infratech Pvt Ltd (GIPL) raised Rs 14500 crore in bonds in June last year, with a covenant that the yields on the bonds would increase by 2% if the company failed to monetize Afcons before June 2024. Now, Axis Trustee, the debenture trustee of GIPL, has sought bondholders’ consent to release the pledge on shares of Afcons Infrastructure, a Shapoorji Pallonji company, to proceed with an initial public issue. The trustee has also requested approval to increase the authorized share capital of Afcons.

Key Points

GIPL raised Rs 14500 crore in bonds with a covenant that the yields on the bonds would increase by 2% if the company failed to monetize Afcons before June 2024.

The zero-coupon bonds maturing in 2026 offered a redemption premium of 18.75%.

Axis Trustee has sought bondholders’ consent to release the pledge on shares of Afcons Infrastructure, a Shapoorji Pallonji company, to proceed with an initial public issue.

Afcons is exploring fresh issuance of equity up to Rs 1500 crore and an ‘offer for sale’ of equity shares through a book-building process, with the proceeds intended to repay existing debt.

The trustee has requested bondholders to “release pledge created in favor of the debenture trustee over up to 9,00,00,000 Afcons equity shares - GIPL held by the company amounting to 20% of the post IPO paid-up capital of Afcons (on a fully diluted basis)”.

Additional Information

Goswami Infratech is a joint venture between SC Finance Investments Private Limited (SC Finance) and SP Finance Private Limited (SP Finance), promoted by the Mistry family.

Afcons is a part of the Shapoorji Pallonji group and is engaged in EPC services.

As of March 31, 2023, the SP group through various companies holds about 99.53% of Afcons on a fully diluted basis, and employees hold the rest.

This situation highlights the complexities and considerations involved in seeking bondholders’ consent for releasing pledges and increasing authorized share capital in the context of an IPO. It also underscores the financial intricacies and strategic decisions involved in the issuance of equity and the utilization of proceeds to repay existing debt.

FAQ

Q1: What is the background of the case?

A1: Goswami Infratech Pvt Ltd (GIPL) raised Rs 14500 crore in bonds with a covenant related to the monetization of Afcons before June 2024.

Q2: What is the trustee seeking from bondholders?

A2: Axis Trustee is seeking bondholders’ consent to release the pledge on shares of Afcons Infrastructure and approval to increase the authorized share capital of Afcons.

Q3: What are the intended uses of the proceeds from Afcons’ equity issuance?

A3: The proceeds from the equity issuance are intended to repay existing debt, while Afcons will retain the proceeds from the funds raised by the issuance of new shares.

Q4: Who are the key stakeholders in this case?

A4: Goswami Infratech is a joint venture between SC Finance Investments Private Limited (SC Finance) and SP Finance Private Limited (SP Finance), promoted by the Mistry family. Afcons is a part of the Shapoorji Pallonji group and is engaged in EPC services.