Piramal Enterprises will merge with housing finance:
- According to a report from Moneycontrol, the board of directors of Piramal Enterprises, a diversified non-bank finance company (NBFC), has approved the merger with its wholly-owned subsidiary, Piramal Capital & Housing Finance (PCHFL). Post-merger, PCHFL will be renamed Piramal Finance. Shareholders of Piramal Enterprises will receive one equity share of Piramal Finance (PFL) and one NCRPS (non-convertible non-cumulative non-participating redeemable preference share) of Rs 67 of PFL for each share they hold in Piramal Enterprises, pending approval from the Reserve Bank of India (RBI).
The consolidation aims to simplify the group’s structure and provide shareholders with direct access to the entire lending business. The company expects the merger to be completed within 9-12 months. Ajay Piramal, Chairman of Piramal Enterprises, stated that the merger was approved by the board with the goal of streamlining the group structure and creating a more robust entity to enhance stakeholder value.
Piramal Capital, categorized as a housing finance company (HFC), is required to adhere to the Principal Business Criteria (PBC), mandating that a minimum of 60 percent of loans be allocated to housing finance, with at least 50 percent for individuals seeking housing finance. However, PCHFL’s current diverse lending portfolio does not meet this requirement. Thus, it is in the process of applying to the RBI to convert its HFC license to an NBFC-ICC license.
An NBFC-ICC, according to RBI, primarily engages in asset finance, loan provision, and securities acquisition. Piramal Enterprises determined that the group cannot maintain two NBFC licenses simultaneously, addressing concerns related to the consolidation.
Furthermore, RBI regulations dictate that since Piramal Capital is classified as an upper-layer NBFC, it must be listed by September 2025.
