Piramal Enterprises on Monday posted a surprise consolidated loss of Rs 2,378 crore in the December quarter as it has made provisioning for its exposure to alternative investment funds (AIFs). The company had posted a bottom-line of Rs 3,545 crore a year ago.
The company has made provisions of Rs 3,540 crore pursuant to the recent RBI circular on the investment of non-banking financial companies(NBFC) in AIFs, which led to a reduction in the assets under management.
In a circular in December 2023, RBI prevented NBFCs and banks from investing in schemes of AIFs that have a direct or indirect downstream investment debtor companies of such entities. These norms intend to mitigate the potential ever-greening through AIF transactions.
In its latest investor presentation, the company said that it has AIF exposure in two schemes relating to the legacy wholesale 1.0 business. Both Piramal Enterprises and Piramal Capital and Housing Finance are limited partners in these schemes.
The company has made a 100% provisioning for this exposure. The provisioning has also impacted capital adequacy ratio by 400 basis points. The company said it remains confident of a full recovery of its AIF investments. Piramal Enterprises and Piramal Capital Housing Finance has received Rs 1,137 crore so far as repayment of interest and principal on these units.
“In our AIF schemes relating to our alternatives business (where we are fund managers), there is no impact of the RBI circular,” it said in an investor presentation. Excluding the impact of the AIF provisions, the NBFC has posted a bottom-line of Rs 290 crore, higher than the Rs 152 crore estimated by analysts at Bloomberg.
Barring the impact of the provisions, total AUM rose 9% y-o-y to Rs 70,823 crore as on December 31.The growth-oriented AUM rose 63% y-o-y to Rs 48,590 crore. On the other hand, legacy assets fell 47% y-o-y to Rs 18,693 crore. Growth assets comprise 72% of the overall book as on December 31.
The company’s retail mix stands at 64% as on December 31. The retail segment’s AUM rose 54% y-o-y to Rs 43,028 crore. The mortgage segment comprises 72% of the retail AUM. The AUM of this segment rose 27% y-o-y to Rs 29,579 crore.
The company said that for the next four years, total assets will rise at a compound annual growth rate of 15%, and retail assets at 23%. Net interest income, the difference between interest earned and expended, fell 19% y-o-y to Rs 835 crore in the December quarter. But, it rose 11% on a sequential basis aided by the recovery in net interest margins.
Net interest margin rose to 11.4% in the December quarter from 11% a quarter ago. The company’s average borrowing cost rose to 8.7% in the December quarter from 8.4% a year ago. “We continue to focus on diversifying our borrowing mix including securitization. Our ALM is well-matched with positive gaps across all buckets,” the company said in a press release.
Gross non-performing asset ratio fell to 2.4% as on December 31 from 4% a year ago. The company disclosed that it has concluded two transactions with asset reconstruction companies in the December quarter with total deal value of Rs 775 crore.
Earlier, the company announced that it will sell its entire 20% stake in Shriram Investment Holdings to Shriram Ownership Trust for Rs 1,440 crore in a bid to monetise non-core assets. “We expect closure in January-March; the proceeds from the transaction will further strengthen our balance sheet,” the press release said.