Tata Sons listing to improve SP Group bond outlook

Mumbai: The Reserve Bank of India (RBI) has rejected Tata Sons' application to voluntarily surrender its registration, leading to speculation that the company will be required to list on the stock exchange, according to sources familiar with the matter. The decision has raised concerns about the SP Group's bond outlook, as the SP Group is required to list its registration due to the RBI's decision.

The SP Group has bonds with a yield of 19%, which is expected to increase significantly. Investors in the SP Group's bonds include Ares Management, Davidson Kempner, Deutsche Bank, Farallon Capital, Cerberus Capital, Varde Partners, Blackrock, and Broadpeak. The RBI's rejection of Tata Sons' application has brought the long-pending listing of the group back into focus.

The SP Group has a stake of 18.37% in Tata Sons, which is pledged as collateral for the bonds. A listing of Tata Sons would provide a clearer and more liquid route for the SP Group to monetize its stake and repay debt. The group's earlier three-year NCD, issued at 19.75%, is likely to trade at a much tighter spread as the credit assessment improves. The extent of the yield tightening will become clearer over the next two to three weeks.