Piramal Finance to raise up to Rs 10,500 cr via bonds, commercial paper

Piramal Finance Pvt Ltd (PFPL), the lending arm of the Ajay Piramal Group, plans to raise up to Rs 10,500 crore through debentures and commercial paper to support the growth of its financing business. 

Icra has assigned a rating of AA with a stable outlook to non-convertible debentures worth Rs 7,500 crore and a rating of A1+ (investment grade) to Rs 3,000 crore worth of commercial paper/short-term debt that PFPL proposes to raise.

For the rating decision, Icra has taken a consolidated view of PFPL with its parent, Piramal Enterprises (PEL), rated AA/Stable/A1+, the agency said a statement.

The outstanding advances made by the group stood at Rs 13,048 crore at end of March. Of this, Rs 9,900 crore will be transferred to PFPL, whose lending book stood at Rs 733 crore on March 31.

While a large part of the incremental assets generated by the group will be booked in PFPL, the overall business model, systems, processes and management at the group level would continue to remain the same, Icra said. 

The rating draws comfort from PEL’s strong and experienced management team, with a track record of successfully scaling up businesses and generating adequate returns. 

The group has significant experience in the real estate sector through both, on-book lending and private equity investments, with robust risk management practices in place. 

These strengths are, however, partially offset by the attendant credit and concentration risks associated with the wholesale funding business model. Going forward, the company’s ability to execute its business plans and growth profitability, raise funds at competitive rates for growing the portfolio, and maintain healthy asset quality would remain key sensitivities.

Along with the transfer of loan book, PFPL is expected to receive equity of at least Rs 1,700 crore from the parent this financial year, which will help increase its net worth from Rs 615 crore as on March 31 to Rs 2,350 crore. 

Overall, at the group level, the lending book has doubled to Rs 13,048 crore as on March 31, compared to Rs 4,766 crore as on March 31, and the group has plans to further expand it aggressively over the medium term. The real estate sector remains a key focus area for the group, contributing to over 80 per cent of the total advances. 

Within this space, the company’s focus has been on residential projects, with operations primarily focused in the five cities of Mumbai, Bengaluru, Chennai, Delhi-National Capital Region and Pune.