SP Group offers $3.4 billion NCDs to HNI investors amid market volatility

Synopsis

Wealth managers are offering Shapoorji Pallonji Group's $3.4 billion NCDs to high-net-worth individuals, requiring a minimum ₹10 crore investment in the secondary market. This move follows past volatility where smaller HNIs quickly exited positions. The current unrated tranche has less disclosure, aiming for patient capital and avoiding wide domestic HNI distribution.

Mumbai: Wealth managers are offering Shapoorji Pallonji Group's latest $3.4 billion (₹28,500 crore) non-convertible debentures to high-net-worth individuals, but only to those willing to invest a minimum of ₹10 crore in the secondary market.

A small portion of the debentures, originally placed with institutional investors at a yield of 19.75%, is being sold down to wealthy clients at yields of 18.0-18.5%, allowing distributors to pocket a spread of up to 175 basis points (1.75 percentage point).

During group firm Goswami Infratech's ₹14,300 crore fundraising in 2023, the bonds saw secondary market volatility as smaller HNIs flipped their positions when market sentiment turned. At one point, the debentures originally issued at a yield of 18.75% were trading at as high as 22%, following a covenant breach and a fall in perception, even before any material credit deterioration.

The latest NCD offering, being an unrated and unlisted tranche, comes with much less disclosure, information and compliance obligations compared to the previous, exchange-listed tranches.

"Last time, a lot of HNIs panicked and exited too quickly," said a wealth manager. "It spooked the market and distorted the credit story. This time, they have raised the bar to ₹10 crore, and they are filtering for patient capital."

The group has also avoided a wide domestic HNI distribution this time. Wealth managers say the allocations to Indian individuals are a fraction of the ₹28,500 crore transaction.

Experts have been concerned over affluent and mass-affluent segments getting into credit often without a full understanding of the risks. "Private credit is not for everyone," said Nachiket Naik, head of private credit Axis Asset Management. "Family offices come through funds that do deep diligence. But direct HNI participation, especially via digital platforms, is a different beast."

Cases like BluSmart, an early-stage mobility platform that raised funds from HNIs via listed NCDs, have led to caution among investors.

...moreless

...moreless