Piramal Enterprises restructuring financial services business under new entity

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Bengaluru: Piramal Enterprises Ltd is restructuring its financial services business by consolidating its real estate and non-real estate financing arms and the newest housing finance business under a single new entity, Piramal Capital, to offer end-to-end lending solutions as well as expand into new territory in future.

Currently, Piramal Finance Pvt. Ltd houses the financial services business, which will be moved under Piramal Capital, a subsidiary of Piramal Enterprises. The restructuring will be concluded by March-end. Once the restructuring is concluded, Khushru Jijina, managing director of Piramal Finance and Piramal Housing Finance Ltd, will head Piramal Capital.

Piramal’s financial services business has grown from Rs35,000 crore in December 2016 to Rs50,000 crore now, including both sanctioned loans and deployed money. Wholesale real estate lending comprises the largest chunk.

Only some of the real estate funds, which deployed equity capital under Indiareit Fund Advisors Pvt. Ltd and the more recent partnership with Ivanhoé Cambridge, a real estate unit of Caisse de Dépôt et Placement du Québec (CDPQ) to deploy equity, will remain under Piramal Fund Management, as a separate unit of Piramal Enterprises.

Going forward, Piramal Capital can expand as an asset manager and even explore new territory such as real estate investment trusts.

“The merger will facilitate rapid expansion of retail housing finance business by leveraging on the existing set up as well as tapping the retail customers of developers to whom financing has been provided. Combining the businesses will create one unique unified platform which will provide entire capital stack to the borrowers. It will lead to overall consolidation of business and simplification of group corporate structure along with efficient use of capital for the business,” Jijina said in an interview on 25 October.

In 2016, Ajay Piramal’s financial services business was restructured and integrated in a prelude to the spin-off of the unit and Piramal Enterprises’s healthcare business. At that time, the financial services business was brought under Piramal Fund Management, though lending was done by Piramal Enterprises. The regrouping and merger this time around seems to be significant in this context.

“This restructuring of a business that has been growing strongly can be seen as further consolidating the assets, liabilities, operations under one arm that can lead to either a public listing at some point of time. It also means Piramal’s housing finance business gets a great platform to grow,” said a Mumbai-based analyst who declined to be named.

Piramal launched its housing finance company in September with a lending model which combines home loans through realty developers and direct lending to retail customers and is “B2B2C” (business to business to customer).

“Piramal Housing Finance would be able to access and leverage the more than 10,000 distributor channel partners which will enable it to rapidly expand its retail lending portfolio,” Jijina said.

On Tuesday, Piramal Enterprises shares fell 0.61%, or Rs16.80, to Rs2,740.55 apiece even as the benchmark Sensex lost 0.16%, or 53.03 points, to end the day at 33,213.13 points.