One of the largest private-credit deals outside the United States raised about Rs286bn (roughly US$3.4bn) in May, drawing roughly 25 global institutions to a three-year, zero-coupon Porteast debenture that pays 19.75% at maturity. The unrated, unlisted paper is secured by a 9.185% stake in Tata Sons and pledges over parts of Shapoorji Pallonji’s real estate and oil and gas businesses. Deutsche Bank led the placement and used offshore derivative routes to broaden demand, illustrating pressure on borrowers to accept steep yields to refinance urgent debt.

Shapoorji Pallonji Group’s Porteast unit closed a large private credit deal in May. It sold three-year, zero-coupon non-convertible debentures that pay 19.75% at maturity. The issue raised about Rs286bn, which converts to roughly US$3.4bn. Issuers chose an unrated, unlisted format and set a high Rs200m minimum ticket to keep retail investors out.

Deal structure and security

The bonds carry an extensive security package. They're secured by a 9.185% stake in Tata Sons. The pledge also covers parts of Shapoorji’s real estate and oil and gas businesses. That package was central to attracting demand at a high yield in a volatile market.

Issuers printed the deal without a final regulatory waiver for the chosen share-pledging mechanism. Porteast wanted a waiver from the Reserve Bank of India to let a non-bank financial company act as the share pledger without meeting bank capital rules. Without that waiver, Porteast would have had to inject about Rs60bn into the borrower or face an event of default. The issuer went ahead anyway to meet an urgent refinancing deadline.

Who bought the paper

About 25 institutional investors took part in the transaction. Named participants included BlackRock, Cerberus Capital Management, Ares Management and Morgan Stanley. Deutsche Bank led and arranged the deal. It also guided several first-time entrants into the rupee private-credit market.

Participation was widened through offshore instruments. Investors used credit-linked notes, total return swaps and sub-participation agreements to gain exposure. That allowed global funds to buy the economic risk while meeting local compliance routes for rupee paper.

Why the issuer moved fast

Porteast printed quickly to lock in refinancing while urgent maturities loomed. The group faced a near-term need to replace existing debt. The issue’s structure lowered some execution risks but left regulatory uncertainty unresolved. Yet investors backed the deal, betting a waiver would be granted, as it had been for a prior Shapoorji unit.

Mastheads

In 2023, a related SP Group unit raised funds via zero-coupon rupee bonds. That earlier sale required public disclosures and ratings. Some of that paper ended up with high-net-worth secondary buyers and forced the issuer to manage retail investor approvals for covenant moves. The new deal avoided those complications by staying unrated, unlisted and by setting a high institutional-only minimum.

Market context and scale

The Porteast transaction stands out for size. It was described as one of the largest private credit deals outside the United States. Private credit in rupee markets is still early. Deals of this magnitude are rare. Raising roughly US$3.4bn in a single private-credit trade shows growing appetite among global managers for bespoke credit exposure in India.

At the same time, the paper carries a steep yield. The 19.75% return reflects both credit and execution risk. Investors required that premium to absorb unrated, unlisted exposure secured against pledged shares and business assets. Market volatility at the time of the sale also pushed required yields higher.

Deutsche Bank played a central role in structuring and placing the issue. It underwrote parts of the deal and brought in a mix of long-standing and first-time rupee investors. The bank also helped onshore investors who faced local buying restrictions by arranging offshore derivative wrappers.

Some foreign investors accessed the trade via the foreign portfolio investment route. Others used structured instruments that replicated rupee risk. Those arrangements let international asset managers participate without direct exposure to local settlement or disclosure rules.

Shapoorji’s earlier Goswami Infratech transaction in June 2023 raised about Rs143bn via zero-coupon bonds that paid 18.75% and carried a BB, rating from CareEdge. That deal was listed and rated, and it forced more frequent exchange disclosures and engagement with high-net-worth secondary holders when waivers were sought. Porteast’s unlisted approach reflected lessons learned. It limited retail involvement and reduced the need for public covenant notices.

The higher yield on the Porteast bonds shows the market priced both larger size and the regulatory unknowns. Yet the number of investors rose from 20 in the Goswami trade to about 25 here, showing wider institutional interest despite the steeper price.

The deal hinged on a waiver from the Reserve Bank of India. The waiver would allow a non-bank financial company to act as the share pledger without meeting full bank-like capital norms. Investors bought the bonds before the waiver arrived. They did so partly because a similar waiver had been granted previously for another SP Group pledge arrangement.

The outcome of the RBI decision matters for execution and for the legal comfort investors will have over pledged shares. If authorities accept the chosen pledging route, the transaction’s security package stays intact. If not, the issuer faced a substantial cash injection or a default trigger under its existing terms.

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The deal raised about Rs286bn and now awaits an RBI waiver on the chosen share-pledging route, a decision that will determine the legal standing of the transaction’s security package.

This article was created with AI assistance.