SP Group’s ₹1,500 Crore Debt Plan: Why Refinancing Costs and Bond Covenants Matter to Businesses

A company’s ability to raise debt is only one part of its financial strength. How much that borrowing costs, where the proceeds can be deployed and whether future obligations can be met are equally important.

A recent financing development involving the Shapoorji Pallonji (SP) Group brings these considerations into focus.

According to a report published by The Economic Times on November 10, 2026, Eqyizen Investment, a financing arm of the group, is considering raising approximately ₹1,500 crore through a tap issue of its existing rupee-denominated bonds. The proposed fundraising is expected around November 23, with proceeds intended for repayments to existing bondholders and funding requirements of group entities. These plans have not yet been confirmed as a completed transaction.

The development is significant because it highlights the complexity of refinancing large debt obligations, particularly when borrowing costs are high and the use of fresh funds is governed by existing contractual conditions.

The numbers behind the refinancing exercise

Eqyizen Investment has already raised substantial amounts through its three-year, zero-coupon rupee bond series.

According to reporting by Reuters and The Economic Times, the financing activity includes:

The proposed ₹1,500 crore tap issue is under consideration and should not be treated as a completed fundraising. The existing bonds carry an annualised yield of 18.95%, while the earlier Porteast Investment NCDs carried a reported yield of 19.75%.

These are transaction-specific financing costs, not representative borrowing rates for Indian companies generally. They nevertheless illustrate the financial implications of refinancing at elevated yields.

The bigger issue: restrictions on how borrowed money can be used

One of the most important aspects of the reported transaction concerns the covenants attached to the group's existing borrowing arrangements.

As reported by The Economic Times, the current terms require 75% of proceeds from new debt to be used towards repayment of bonds issued by Porteast Investment, another group entity. This leaves only 25% available for other purposes.

The group is reportedly seeking to increase the portion available for uses other than bond repayment to at least 50%.

This distinction matters because raising fresh funds does not necessarily mean that the entire amount is available for business expansion, working capital or other financial requirements.

Debt agreements can specify:

• How much of the proceeds must be used for repayment of existing obligations.

• Whether funds can be transferred to other group entities.

• Restrictions on additional borrowing.

• Conditions attached to collateral and security.

• Financial covenants that must be maintained throughout the borrowing period.

For a business with multiple subsidiaries or financing entities, these conditions can significantly influence financial flexibility.

Why refinancing can become a credit-risk concern

Refinancing is often used to manage upcoming debt maturities, replace expensive borrowings or extend repayment timelines.

However, refinancing does not automatically reduce financial risk. Its effectiveness depends on the cost, structure and repayment capacity associated with the replacement debt.

There are four areas businesses should examine.

1. The cost of replacement borrowing

When new debt carries a high financing cost, the company must generate sufficient cash flows to meet the resulting obligations.

A refinancing exercise that merely replaces one expensive liability with another may provide time, but it does not necessarily improve the underlying debt-servicing position.

2. The concentration of repayment obligations

Companies should examine whether several large repayments fall due within a short period.

A concentrated maturity profile can create liquidity pressure, particularly if operating cash flows are seasonal or dependent on project collections.

3. Restrictions on the use of funds

Borrowing arrangements may restrict the deployment of proceeds.

This can limit management's ability to redirect funds towards other requirements, even when the wider group faces competing liquidity needs.

4. Dependence on collateral or asset monetisation

The reported SP Group financing arrangements are linked to the group's holding in Tata Sons. The group has also been pursuing a proposal to unlock value from this investment.

Where repayment plans depend on a future asset sale, listing or other liquidity event, the timing and feasibility of that event become important considerations.

A delay in the expected liquidity event can affect the refinancing plan and the group's ability to meet its obligations.

What CFOs should review before taking on additional debt

The development offers a useful reminder for companies planning a fresh borrowing or refinancing exercise.

Before approaching lenders or investors, finance teams should assess the complete debt structure rather than focusing only on the amount they intend to raise.

Key areas to review include:

These factors help establish whether the proposed borrowing is supported by a sustainable repayment plan.

Why the overall debt structure matters in a credit assessment

A company's credit profile cannot be understood by looking at its revenue, profitability or total debt in isolation.

Two businesses with similar levels of borrowing may have very different financial risk profiles because of differences in repayment schedules, liquidity, collateral, cash flow visibility and covenant restrictions.

For businesses preparing for a credit rating exercise, it is important to have a clear and consistent picture of:

• Existing and proposed borrowings.

• Repayment schedules and refinancing requirements.

• Fund utilisation and inter-company transactions.

• Security arrangements and guarantees.

• Projected cash flows and debt-servicing capacity.

The quality of financial disclosures and the ability to explain the overall borrowing structure are important parts of preparing for an external credit assessment.

The larger takeaway

The SP Group refinancing development highlights a point that applies well beyond large conglomerates: raising fresh debt is not the same as resolving debt-related risk.

The real test is whether a company can manage its borrowing costs, meet repayment obligations and retain enough financial flexibility to support its operations.

For CFOs and business owners, understanding these factors before entering a new borrowing arrangement can make debt planning more disciplined and financial disclosures more meaningful.

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Disclaimer: This article is intended for general informational and educational purposes only and does not constitute financial, credit, investment or legal advice. Credit ratings are assigned solely by SEBI-registered Credit Rating Agencies based on their independent methodologies, policies and information available to them. FinMen Advisors and Consultants Private Limited provides preparatory and advisory support to businesses undergoing a rating exercise and does not issue, influence or guarantee any rating outcome.