Power Finance Corporation Faces Scrutiny Over Massive Loan To Shapoorji Pallonji Group

Power Finance Corporation (PFC) recently approved a loan of approximately Rs 20,000 crore to the Shapoorji Pallonji Group (SP Group). This decision has raised concerns among independent directors at PFC.

Questions on Loan Sanctioning

Independent directors question why PFC, which typically does not finance infrastructure businesses, sanctioned this loan. PFC traditionally lends to companies in the energy sector. Sources say that the issue will be addressed in a board meeting scheduled for August 6.

Corporate Governance Concerns

According to CNBC TV 18, PFC primarily provides loans to power generation companies. The loan to SP Group has triggered concerns about corporate governance at PFC. Independent directors may vigorously address the issue in the upcoming meeting.

Security and Loan Terms Scrutinized

Directors have raised concerns about the loan’s security. They question why PFC sanctioned the loan with only 1.75 times the loan amount as collateral. Earlier, Tata Sons had also borrowed from SP Group using its Mumbai property as collateral.

Usage of Loan Funds

The SP Group plans to use the loan to repay foreign debt, as it is currently in default on this loan. Independent directors will discuss whether there is a limit on the principal amount for the four-year loan term in the board meeting.

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