RBI Waiver Shields Shapoorji Pallonji’s $3.4 Billion Private Credit Deal from Cost Surge

According to news reports, Shapoorji Pallonji Group has received a 3-year waiver from the RBI for its finance arm, Sterling Investment Corp, helping the group avoid a costly 200 bps increase on its $3.4 billion private credit deal linked to Tata Sons shares.

RBI Waiver Helps Maintain Current 19.75% Interest Rate

The Reserve Bank of India granted a 3-year extension to Sterling Investment Corp., Shapoorji Pallonji’s non-banking financial company, to meet capital adequacy norms. This move was crucial for preventing an automatic interest rate hike to above 21.75% on the $3.4 billion loan facility. The deal, India’s largest private credit transaction, involved a zero coupon bond and used a 9.2% stake in Tata Sons as collateral.

Waiver Prevents Possible Default & Capital Injection

According to the agreement terms, failure to secure the waiver by September could have forced Sterling Investment to inject ₹6,000 crore in fresh capital or face potential default if more than 50.1% of bondholders demanded repayment. The waiver now provides compliance flexibility, stabilising the group’s financial commitments without immediate liquidity pressure.

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Global Investors and Banks Backed the Deal

The private credit deal attracted global investment firms such as Ares Management, Cerberus Capital, Davidson Kempner, and Farallon Capital. Deutsche Bank acted as the sole arranger and also invested in the bonds. The zero-coupon debentures, denominated in local currency, demonstrate wider investor confidence in long-term Indian private credit backed by strategic holdings.

Strategic Implication for Shapoorji Group

The waiver not only helps reduce immediate borrowing costs but also ensures that Shapoorji maintains its equity position in Tata Sons. Preserving this strategic holding keeps asset leverage optimised while allowing breathing space to realign capital adequacy metrics over the next 3 years.

Conclusion

The RBI’s waiver provides significant relief to Shapoorji Pallonji by preventing a sharp rise in borrowing costs and averting potential default. With extended time to meet regulatory norms and retain strategic assets, the group now preserves balance sheet flexibility within India’s tightening financial space.

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