Piramal Enterprises stocks slip 6% after merger plans with subsidiary to meet regulatory norms

Piramal Enterprises proposed to merge itself with Piramal Capital and Housing Finance Ltd (PCHFL) to form a single entity. Post the merger, PCHFL is likely to be named as Piramal Finance Ltd (PFL) upon receipt of the NBFC-ICC licence. ICC refers to investment and credit company.

As per the scheme of merger, for every 1 equity share of Piramal Enterprises, its shareholders will get 1 equity share of PFL and 1 NCRPS (non-convertible non-cumulative non-participating redeemable preference shares) of ₹67 of PFL (subject to approval by the Reserve Bank of India).

According to RBI norms, housing finance companies (HFCs) are required to comply with principal business criteria wherein a minimum 60% of loans should go towards housing finance and minimum 50% of loans to individuals for housing finance.

PCHFL, by virtue of its current diversified lending profile, has not been able to fulfil the requirement. Hence, PCHFL is in the process of submitting an application to RBI for conversion of its HFC licence to an NBFC-ICC licence. This will result in two distinct NBFC licences within the same group, due to which the aforesaid merger has been proposed.

PEL said that the existing HFC license will continue in the interim period until the receipt of the NBFC-ICC licence. PCHFL, meanwhile, is required to be mandatorily listed by September 2025.

After the announcement, shares of Piramal Enterprises lost as much as 6.4% to hit an intra-day low of ₹838 on the National Stock Exchange of India (NSE).

The company also announced its earnings for the March quarter on Wednesday. Net interest income (NII) jumped 36% to ₹839 crore in Q4 FY24 compared to a year ago. Meanwhile, consolidated profit after tax stood at ₹137 crore compared with a loss of ₹196 crore a year ago.