Piramal Enterprises (PEL ) has approved it’s merger with wholly owned subsidiary Piramal Capital & Housing Finance (PCHFL). Post merger the the resultant entity will be renamed as Piramal Finance (PFL).
- Current businesses of PEL and PCHFL
- PEL is a non-deposit taking Non-Banking Finance Company – Investment and Credit Company (NBFC- ICC), engaged in the business of providing diversified financial services.
- PCHFL is registered as a housing finance company and its business comprises (i) housing finance, (ii) corporate lending, (iii) retail lending, and (iv) real estate lending.
- Merger of the two has been announced to comply with the regulatory requirements.
- PCHFL is an upper-layer NBFC and hence according to the RBI’s regulations, it is required to be mandatorily list by September 2025. To achieve this, PEL has informed the following –
- PCHFL is a housing finance company (HFC), and so is required to comply with the Principal Business Criteria (PBC) of minimum 60 percent of loans to housing finance and minimum 50 percent of loans to individuals for housing finance. The company said, PCHFL, due to its current diversified lending profile, has not been able to fulfill the above PBC requirement. Therefore, it is in process of submitting an application to the RBI for conversion of its HFC license to an NBFC-ICC license.
- Post NBFC-ICC licence to PCHFL, the group will have two entities with the same licence – PEL and PCHFL. As there cannot be two entities with the same licence in one group, hence the merger of the two.
- PCHFL is an upper-layer NBFC and hence according to the RBI’s regulations, it is required to be mandatorily list by September 2025. To achieve this, PEL has informed the following –
- Consideration for the merger –
- For every share of PEL, shareholders will receive one equity share of PFL and subject to RBI’s approval, one NCRPS (non-convertible non-cumulative nonparticipating redeemable preference share) of Rs 67 of PFL.
- The company expects the entire process to be completed in 9-12 months.
Above is a process mainly undertaken to comply with the regulations and hence it would not change any of my analysis.
Merger is between a parent and it’s wholly owned subsidiary without any material business implications.