India's Piramal to provision for AIF exposure as cenbank tightens rules (updated)

Piramal Enterprises

21/12/2023 09:46

(Adds details from IIFL Finance's statement, updates share
movements)
       BENGALURU, Dec 21 (Reuters) - India's Piramal
Enterprises  PIRA.NS  said on Thursday that it would set aside
funds to cover its exposure to alternate investment funds (AIF),
days after the country's central bank tightened rules governing
such holdings.
    The Reserve Bank of India (RBI) on Tuesday barred all
entities under its regulation, including banks and non-banking
finance companies, from investing in AIFs that have investments
in borrowers in the past 12 months. 
    As per the RBI's direction, regulated entities must
liquidate their investments in AIFs within 30 days should the
fund invest in an existing borrower. Failure to comply mandates
the entity to make full provisions on these investments. 
    As of Nov. 30, the value of investments made by the company
and Piramal Capital and Housing Finance in AIF units was 38.17
billion rupees ($458.78 million), it said in a filing. 
    Within the AIF investments, 6.53 billion rupees is
attributed to funds with no exposure to debtor companies of
Piramal Enterprises, the firm said. 
    Of the remaining 31.64 billion rupees, 17.37 billion rupees
are invested in three entities that served as debtor companies
of Piramal Enterprises in the last 12 months. 
    The company intends to adjust the remaining 31.64 billion
rupees through capital funds or provisions and is engaging with
relevant stakeholders to finalise the details, it said.
    Jefferies estimates Piramal's AIF exposure to be 7% of its
assets under management and said provisioning for it could lead
to a 10% hit to its net worth. 
    Piramal is confident of a full recovery of its investments,
it said.
    Meanwhile, IIFL Finance  IIFL.NS , said in a separate filing
that it had an investment of 213.7 million rupees in a fund with
a debt exposure of 32.8 million rupees. The firm's remaining AIF
investments, totaling 9.1 billion rupees as of Dec. 21, carry no
exposure to existing debtors and will not impact its additional
provisioning or capital adequacy needs, it said. 
        Shares of Piramal Enterprises fell 1.7% on Thursday
while IIFL Finance lost about 3%.

($1 = 83.1990 Indian rupees)

 (Reporting by Hritam Mukherjee in Bengaluru; Editing by Dhanya
Ann Thoppil)
 ((Hritam.Mukherjee@thomsonreuters.com; X: @MukherjeeHritam;))