TCS shares meltdown turns heat on Shapoorji Pallonji's $3 bn private credit deal

V Keshavdev

A sharp selloff in Tata Consultancy Services (TCS) stock is turning the heat on India’s largest private credit transaction with a covenant trigger episode likely in the $3-billion-plus fundraise of Shapoorji Pallonji (SP) Group.

In a LinkedIn post, Junquang Tan, CFA, Senior Director and Head of Asia Credit Research, Octus, a credit intelligence and data provider, flagged how a sustained drop in TCS could turn a marquee financing into a stress point: “India’s largest private credit deal — Shapoorji Pallonji’s $3B+, 21.75% (you read that right) Porteast debentures backed by Tata Sons shares — is feeling the heat from the AI-induced IT services rout… Our estimates show the LTV on the Porteast NCDs is creeping toward certain covenant triggers — and daily accruals aren’t helping.”

The shares of TCS are down 18% year-to-date and 27% over the past one year, closing at ₹2,649 on February 26, amid investor concerns that accelerating artificial intelligence adoption could disrupt traditional IT services revenue models.

The SP deal, structured through its financing arm Porteast and carrying a steep 21.75% coupon, is backed by pledged shares of Tata Sons. In turn, Tata Sons derives a substantial portion of its value from its holding in TCS, making the IT bellwether central to the transaction’s collateral strength. While the SP group holds 18.38% stake in Tata Sons, which, in turn, owns 71.7% stake in TCS, whose market cap is currently at Rs 9.57 lakh crore.

Lenders to deal, which was struck in May 2025, include the US-based Blackrock, Pimco, Ares Management and Cerberus Capital.

According to the credit analyst, the loan-to-value (LTV) ratio on the non-convertible debentures has been inching closer to covenant trigger levels as the TCS stock declined. Daily interest accruals at the high coupon only add to the pressure, gradually increasing the effective leverage if collateral values remain volatile.

The key variables to watch out for include the movement in TCS shares, any additional collateral top-ups, and the response of lenders should covenant thresholds be breached. For now, there is no indication of a default, but the episode highlights how swiftly public market corrections can transmit stress into private credit structures.

According to PwC, India has emerged as one of the largest private debt markets in the APAC region, as much as 30% of private credit fundraising by the end of 2025. Historically, offshore foreign portfolio investors have been the biggest contributors to private credit invested in India. The development comes as India’s fast-growing private credit market navigates its first major cycle of volatility linked to global technology repricing over AI fears.