Piramal also said that the company will put in equity capital of Rs 8,000 crore to Rs 10,000 crore into the financial services business during FY20.
The board of Piramal Enterprises on Friday approved a proposal to raise up to Rs 800 crore through secured non-convertible debentures (NCDs). Late in August, the company had decided to defer its plan to raise Rs 3,000 crore through NCDs.
In recent months, the company’s financial services business has faced difficulties in raising money amid a situation of tight liquidity after defaults by some entities of the Infrastructure Leasing & Financial Services (IL&FS) group in September 2018.
After announcing its results for the quarter ended June, the management of Piramal Enterprises acknowledged as much. Chairman Ajay Piramal told analysts that while the liquidity crisis settled down a bit during December 2018, it again intensified in April due to negative news flow from large corporates. “Consequently, CPs (commercial papers) have dried up. Banks and mutual funds are hesitant to lend to NBFCs. The relapse made it one of the most prolonged crises within this sector,” he said.
Piramal also said that the company will put in equity capital of Rs 8,000 crore to Rs 10,000 crore into the financial services business during FY20. Till the end of December 2019, the company has plans to raise nearly Rs 25,000 crore of long-term money through various measures, including additional bank lines, NCDs, external commercial borrowings (ECBs) and dollar bonds.
The management had said that the funds raised as debt and equity will be sufficient to take care of repayments worth Rs 17,000 crore scheduled over the six months from July.
The company’s loan book grew 20% year-on-year (y-o-y) to Rs 56,600 crore in the June quarter. Between September 2018 and June 2019, the financial services business raised Rs 18,500 crore of long-term loans and reduced its exposure to CPs to Rs 7,300 crore from Rs 18,000 crore.
In a note dated September 12, Motilal Oswal Financial Services said that Piramal Enterprises is focusing on reducing key large exposures such as those to realtors Lodha, Wadhwa and Omkar, reducing its share of short-term borrowings and diversifying the loan mix to lower-risk assets.
On Friday, shares of Piramal Enterprises ended at Rs 1,902.65 on the BSE, down 3.19% from their previous close. The fund-raising announcement was made after the close of trade.