Piramal Enterprises to merge with unlisted housing finance arm for listing norms, simpler group structure

The scheme is subject to sanction of the jurisdictional National Company Law Tribunal.

The board of directors at the diversified non-bank finance company Piramal Enterprises has approved its merger with wholly owned subsidiary Piramal Capital & Housing Finance (PCHFL), which will now be rechristened Piramal Finance.

As a part of the merger consideration, for every share of Piramal Enterprises, shareholders will receive one equity share of PFL and subject to RBI's approval, one NCRPS (non-convertible non-cumulative nonparticipating redeemable preference share) of Rs 67 of PFL.

The company expects the entire process to be completed in 9-12 months. The primary objectives for the consolidation is so that the group structure is simplified and shareholders can have direct access to the entire lending business.

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Ajay Piramal, Chairman, Piramal Enterprises said, “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."

Piramal Capital is a housing finance company (HFC), and so is required to comply with the Principal Business Criteria (PBC) of minimum 60 percent of loans to housing finance and minimum 50 percent of loans to individuals for housing finance.

The company said, PCHFL, by virtue of its current diversified lending profile, has not been able to fulfill the above PBC requirement. Therefore, it is in process of submitting an application to the RBI for conversion of its HFC license to an NBFC-ICC license.

An NBFC-ICC is any company with its principal business in asset finance, providing loans and the acquisition of securities, according to the RBI.

Piramal Enterprises also decided that the business cannot have two NBFC licences in the same group, therefore, the consolidation erases those worries.

Additionally, according to RBI's regulations, since Piramal Capital is an upper-layer NBFC, it is required to be mandatorily listed by September 2025.

“Piramal Capital is an upper layer NBFC and is mandated to list by September 2025. By pursuing a merger, the resultant listed entity will meet that requirement. Other reasons for pursuing a merger are that having two lending entities introduces operational inefficiencies. We think it’s a cleaner structure from a governance perspective and ongoing operating inefficiency to have one entity," said Jairam Sridharan, managing director, Piramal Enterprises.

He added, "Our business model is a multi-product retail, which means a pure housing finance licence can end up being restrictive."

In an exchange filing, Piramal Enterprises said, "The amalgamation of PEL with PCHFL would be a seamless transition, as PCHFL has significantly

larger scale of operations and wider geographical presence, as compared to PEL."

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.

On May 8, Piramal Enterprises posted a net profit of Rs 137 crore for the fourth quarter ending March, against loss of Rs 195.9 crore in same period previous fiscal. Revenue from operations during the quarter increased by 16 percent year-on-year to Rs 2,473.3 crore.