Piramal Enterprise to raise Rs 7,000 cr through QIP and Rights offering

There is strong interest in QIP from pension and long funds from overseas and as well as existing shareholders, says Piramal

Piramal Enterprises (PEL), in the process of raising Rs 7,000 crore, will invest the money over the next three to five years in financial services, pharmaceuticals and health care.

It is raising Rs 5,000 crore through an issue of Compulsorily Convertible Debentures (CCDs), with existing shareholders being offered equity shares on a rights basis to raise another Rs 2,000 crore. The CCDs are being issued through Qualified Institutional Placement (QIP).

It had earlier raised equity in 1992, of Rs 100 crore, the shares being issued to foreign institutional investors.

Ajay Piramal, chairman, said most of funds raised from the equity offering will go into financial services, including housing finance. Pharma and health care will also receive investments from these proceeds. To be used for expansion, new projects and acquisitions.

The CCDs' face value will be Rs 107,600 each, convertible into equity shares of a face value of Rs 2 each, with a maturity period of 18 months. The coupon (interest rate) would be 7.9 per cent.

The holders have the option to convert all or part of the CCDs into equity shares any time before the maturity date. Each CCD will be convertible into 40 equity shares. The issue is expected to close on October 25. The conversion price is Rs 2,690 an equity share, against the floor price of Rs 2,688.35, determined in line with the formula prescribed by the Securities and Exchange Board of India.

Kotak Mahindra Capital, Citigroup Global Markets India, Morgan Stanley India and Motilal Oswal Investment Advisors are managing the QIP offering.

As for the rights issue of equity shares, Piramal said it gives a chance for existing investors to participate in the capital raising. PEL's promoters have underwritten 90 per cent of the offer.

On Wednesday, the share closed flat on the BSE, at Rs 2,756, the market capitalisation being Rs 47,559 crore at the close of trade. The group has set a target to achieve market capitalisation of $20 billion (Rs 1.3 lakh crore) by 2020 and to clock annual growth of 20 per cent.

The total loan book of its financial services vertical grew 79 per cent over last year to Rs 28,648 crore as of end-June. Piramal Housing Finance, wholly-owned subsidiary of Piramal Finance, started operations last month with initial capital of Rs 1,000 crore. The housing finance arm plans to achieve a loan book of Rs 15,000 crore by 2020. The company has an operational branch in Goregaon, Mumbai, and plans another in Thane.

PEL had posted a 31 per cent rise in net profit at Rs 302 crore in the June quarter over the Rs 231 crore in the same period a year before. Revenues for the quarter were 27 per cent higher at Rs 2,254 crore.