Piramal Enterprises' Rs 3,650-cr rights issue subscribed 8% ahead of close

Issue closes Tuesday; promoters confident of amassing full subscription

Ajay Piramal-led Piramal Enterprises’ Rs 3,650-crore rights issue will have to do all the heavy lifting in the final two days, with the offering subscribed less than 10 per cent until Friday. 

According to the data provided by the BSE, the rights issue — where existing shareholders are entitled to buy more shares in a company typically at a discount to the prevailing market price — has garnered bids for 2.22 million shares, just 8 per cent of the total issue size of nearly 28 million shares. The issue closes on Tuesday. To be sure, bulk of the subscription for rights issue takes place closer to the end date. 

In the eventuality the offering remains undersubscribed, the promoters of the company, who hold around 46.1 per cent stake, will have to make up for the demand shortfall. 

“We are confident that our rights issue will be fully subscribed,” the company said in an email response to a query. “Moreover, given that the promoters have fully underwritten the rights issue, any shortfall on the issuance will be subscribed to by the promoters to ensure success of the issuance.” 

The fundraise by Piramal Enterprises, which straddles both financial services and health care, is being done to pare debt. At the end of the earlier financial year, the company’s total debt stood at Rs 56,000 crore; debt-to-equity ratio was nearly 2:1. For a non-banking financial company (NBFC), the debt levels are comfortable, say analysts. 

The company expects to further strengthen its balance sheet with the latest round of fundraising. 

On Friday, Piramal Enterprises announced it is divesting its health care analytics business Decision Resources Group (DRG) to US-listed Clarivate Analytics. The deal, expected to be complete next month, will garner $950 million (around Rs 6,750 crore). 

Shares of the company rose 5.2 per cent to end at Rs 1,627 following the announcement. The spike in the stock price sweetens the deal for investors. 

In the rights issue, shares are being offered at Rs 1,300 apiece — an attractive discount of 20 per cent to the current market price. 

According to Bloomberg, the consensus 12-month price target for the stock is Rs 2,022, implying an upside of 24 per cent of current levels. 

Life Insurance Corporation of India, East Bridge Capital, Canadian institutional investor CDPQ and Aberdeen are some of the prominent public shareholders in the company. “The rights issue is receiving strong interest from both institutional as well as retail investors. Most large institutional investors have already confirmed their interest to participate in the rights issue,” the company said. 

Piramal Enterprises is looking to increase the wager in the financial services sector. The fundraise, along with the proceeds from the DRG sale, will be used to strengthen the balance sheet and diversify its NBFC business, Chairman Ajay Piramal said on Friday.

The company believes the turmoil in the NBFC space will throw up a host of opportunities for stronger players.