Power Finance Corporation Faces Corporate Governance Concerns Over Shapoorji Pallonji Group Loan

Sources with direct knowledge of the situation have informed that Power Finance Corporation Ltd. (PFC), a state-owned power lender, is encountering corporate governance issues concerning a recent loan approval to the Shapoorji Pallonji Group (SP Group). Independent directors at PFC are expected to address these concerns during a board meeting scheduled for August 6.

PFC recently sanctioned a loan of approximately ₹20,000 crores to the SP Group, a move that has sparked scrutiny from its independent directors. The directors have raised several issues regarding the loan, starting with its relevance to PFC’s core business. The loan is intended for the SP Group’s infrastructure projects, which diverge from PFC’s primary focus on the energy sector.

Also Read: Indian Markets Plunge Amid Global Sell-Off Concerns

Another point of contention is the loan’s collateral arrangement. The independent directors question the approval of a loan secured by collateral valued at only 1.75 times the loan amount. Previously, the loan was under review with Tata Sons shares as collateral, but this was later switched to a land parcel in Mumbai.

Further complicating the matter, concerns have been voiced about the loan potentially being used to settle SP Group’s debts with foreign lenders, which could be viewed as a bailout from default.

The loan agreement includes a four-year moratorium on the principal repayment, adding to the debate.

An anonymous independent director revealed that these issues will be thoroughly discussed in the upcoming board meeting.

Power Finance Corporation has not yet responded to request for comment.

Currently, PFC’s shares are trading at ₹496.75, down 5.6%. However, the stock has seen a 25% increase so far this year.