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The board of directors of Piramal Enterprises, a diversified non-bank finance company, has approved the merger of its wholly-owned subsidiary Piramal Capital & Housing Finance (PCHFL) with the parent company Piramal Enterprises (PEL). The new entity will be named Piramal Finance Limited (PFL) post-merger. The primary objectives of the consolidation are to simplify the group structure, create a more flexible entity and give shareholders direct access to the entire lending business. It is applying to RBI to convert its HFC license to an NBFC-ICC (non-banking financial company-investment and credit company) license. Piramal Enterprises reported a net profit of INR 137 crore for Q4 FY24.
The board of directors of Piramal Enterprises, a diversified non-bank finance company, has approved the merger of its wholly-owned subsidiary Piramal Capital & Housing Finance (PCHFL) with the parent company Piramal Enterprises (PEL). PCHFL will be renamed Piramal Finance Limited (PFL) post-merger. Advertisement
As part of the merger consideration, Piramal Enterprises shareholders will receive one equity share of PFL for every share held in Piramal Enterprises. Subject to RBI approval, they will also receive one non-convertible non-cumulative non participating redeemable preference share of INR 67 in PFL.
The company expects the entire merger process to be completed within 9-12 months. The primary objectives of the consolidation are to simplify the group structure, creating a more flexible entity and give shareholders direct access to the entire lending business.
Piramal Capital is a housing finance company (HFC), and so is required to comply with the Principal Business Criteria (PBC) of minimum 60% of loans to housing finance and minimum 50% of loans to individuals for housing finance. However, PCHFL's diversified loan profile does not meet this. It is applying to RBI to convert its HFC license to an NBFC-ICC (non-banking financial company-investment and credit company) license.
An NBFC-ICC primarily engages in asset financing and securities acquisition, as per RBI. Piramal Enterprises feels having two NBFC licenses in the group is unnecessary, so the consolidation resolves that issue.
Additionally, as an upper layer NBFC, Piramal Capital must get listed by September 2025 as per RBI rules. The merger will result in a listed combined entity meeting this requirement. It also eliminates operational inefficiencies of separate lending entities and creates a cleaner governance structure.
The filing noted the amalgamation is a seamless transition as PCHFL has larger scale and wider presence than PEL. The company expects the entire process to be completed in 9-12 months.
The scheme is subject to sanction of the jurisdictional National Company Law Tribunal and receipt of necessary approvals from the National Stock Exchange of India Limited, BSE, SEBI, Reserve Bank of India, shareholders and creditors, as may be directed by the NCLT and such other regulatory/governmental authorities or person, as may be applicable.
Piramal Capital & Housing Finance recently invested approximately INR 300 crore to fund the construction of a new villa development project by Cybercity Builders & Developers in Hyderabad. Some of the funding will also go towards Cybercity Developers acquiring land that was previously purchased from Phoenix Group. One of the subsidiaries of Phoenix Group had earlier bought the land from Gulf Oil India, a Hinduja Group company.
As per sources, the financing deal has been finalized and the funds will be disbursed in tranches based on certain milestones or conditions being met.
Institutional investors are increasingly focusing on residential projects like villa and plotted developments as they seek attractive opportunities in the real estate sector. Such projects offer investors strong prospects for high returns driven by growing demand for premium housing options and customized living spaces.
Piramal Enterprises reported a net profit of INR 137 crore for the fourth quarter of FY24, compared to a loss of INR 195.9 crore in the same period last year. Revenue from operations during the quarter increased 16% year-over-year to INR 2,473.3 crore.
The company wrote back INR 1,067 crore in provisions for its alternative investment fund (AIF) holdings, in line with Reserve Bank of India (RBI) guidelines. Managing Director of Piramal Finance, Jairam Sridharan said they recovered INR 450 crore in Q4. He expects further recoveries from the remaining INR 2,000 crore in provisions.
In Q3 FY24, Piramal Enterprises had reported a loss of INR 2,378 crore after setting aside INR 3,540 crore to cover AIF investments.
In December 2023, RBI prohibited regulated entities like banks, non-bank lenders and housing financiers from investing in AIFs that invested in their borrower companies. It said such investments must be liquidated within 30 days; else 100% provisioning would be required. The guidelines, it said, have been introduced to address concerns over potential evergreening through this route.
In March, RBI clarified the definition of downstream investments excludes equity shares of debtor companies. Other investments like hybrid instruments remain covered. Provisioning is required only for the lender's investment in the debtor via AIF, not the entire AIF investment. Investments via intermediaries like funds of funds or mutual funds are excluded. By January, at least six Indian banks made a combined provision of over INR 1,070 crore on their investments in AIFs after the RBI's directive.
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