 "Piramal Enterprises to merge with unlisted housing finance arm for listing")
The board of directors of Piramal Enterprises, a diversified non-bank finance company (NBFC), has given the green light for its merger with its wholly owned subsidiary, Piramal Capital & Housing Finance (PCHFL), which will be renamed Piramal Finance following the merger, according to a Moneycontrol report.
Under the terms of the merger, shareholders of Piramal Enterprises will receive one equity share of Piramal Finance (PFL) for each share they hold in Piramal Enterprises, along with one NCRPS (non-convertible non-cumulative non-participating redeemable preference share) of Rs 67 of PFL, subject to approval from the Reserve Bank of India (RBI), the report added.
The main objectives behind this consolidation are to simplify the group structure and provide shareholders with direct access to the entire lending business. The company anticipates that the merger process as a whole will be finalised within 9-12 months.
Moneycontrol cited Ajay Piramal, Chairman of Piramal Enterprises, as saying, "With the intent of further simplifying our group structure and creating a stronger, more flexible entity that enhances value for all stakeholders, the Board of Directors has approved PEL's merger with its subsidiary, Piramal Capital & Housing Finance Ltd, subject to regulatory approvals."
As Piramal Capital is classified as a housing finance company (HFC), it is obligated to adhere to the Principal Business Criteria (PBC), which stipulates that a minimum of 60 per cent of loans must be allocated to housing finance, with at least 50 per cent of loans extended to individuals for housing finance purposes.
The company noted that PCHFL, due to its current diverse lending portfolio, has not met the aforementioned PBC requirement. Consequently, it is in the process of applying to the RBI for the conversion of its HFC licence to an NBFC-ICC licence.
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An NBFC-ICC, as defined by the RBI, is a company whose primary business involves asset finance, loan provision, and the acquisition of securities.
Piramal Enterprises also concluded that the business could not hold two NBFC licences within the same group, thus alleviating concerns surrounding the consolidation.
Moreover, in accordance with RBI regulations, since Piramal Capital is classified as an upper-layer NBFC, it must be listed by September 2025.
On May 8, Piramal Enterprises reported a net profit of Rs 137 crore for the fourth quarter ending March, compared to a loss of Rs 195.9 crore in the same period the previous fiscal year. Revenue from operations during the quarter increased by 16 per cent year-on-year to Rs 2,473.3 crore.