Piramal Enterprises to adjust Rs 3,164 cr exposure to AIF in its financials

Move follows RBI directive limiting investments in AIFs to curb evergreening

In line with Reserve Bank of India (RBI) directives, Piramal Enterprises has decided to adjust Rs 3,164 crore worth of exposure in Alternative Investment Funds (AIFs) in its financial statements through capital funds or provisions.

The value of investments by Piramal Enterprises and Piramal Capital and Housing Finance in AIF units was Rs 3,817 crore as of November 30. However, of this, Rs 653 crore pertains to funds that have no exposure to any debtor companies of PEL.

RBI on Tuesday restricted banks and financial institutions from investing in AIFs where there is any downstream link or exposure in a debtor firm. If the bank or NBFC already has an exposure or lent to the debtor firm in the last 12 months, then it cannot invest in an AIF investing in the same company. RBI directed them to liquidate such assets within 30 days or keep 100 per cent provisions for the same in case of missing the timeline.

 

“Of the remaining Rs. 3,164 crores, Rs. 1,737 crores worth of downstream investments have been made by the AIF into 3 entities that are (or were in the last 12 months) debtor companies of PEL (consolidated),” the company said in an exchange filing on Thursday.

The company said that it was confident of full recovery of the underlying downstream investments in the impacted AIF units.

“PEL (consolidated) has received Rs. 905 crores so far as repayment of interest and principal on these units,” the firm added.

The shares of the company were trading 2 per cent lower at Rs 868 apiece at 10:30 am . The shares closed nearly 8 per cent down in Wednesday’s trade.

PEL has a consolidated net worth of Rs 28,710 crore (September end 2023), and a capital adequacy of 31 per cent, the company said in the statement.

According to sources, the members of Indian Private Equity and Venture Capital Association — an industry body for AIFs, convened a meeting on Wednesday to discuss their submissions on the RBI directive.

The RBI advisory followed concerns on evergreening of loans through AIFs—a pooled investment vehicle which invests in assets like real estate, startups, private equity, SMEs, venture debt, etc. The market regulator had shared the data on the possible circumventions of the financial sector norms to RBI.