Piramal Enterprises shares drop 6% on merger plan

Shares of Piramal Enterprises (PEL) fell over 6% in opening trade on Thursday after the non-bank finance company approved its merger with unlisted wholly owned subsidiary Piramal Capital & Housing Finance (PCHFL), which will be renamed as Piramal Finance Limited (PFL). The decision was taken at its board meeting on May 8, where its board approved its quarterly earnings and also declared a dividend of ₹10 apiece.

The merger proposal is subject to approval of banking and market regulators, shareholders and creditors, as well as National Company Law Tribunal and stock exchanges.

As per the proposed merger plan, 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 non-participating redeemable preference share) of ₹67 of PFL. Further, PCHFL will be renamed as PFL following the receipt of the NBFC-ICC license.

It is to be noted that Piramal Capital is an upper layer NBFC and is required to be mandatorily listed by September 2025. With this merger, the resultant listed entity will fulfill that requirement. The company also believes that the merger will simplify the group structure for smooth transition and seamless regulatory compliance. This will also help shareholders to gain direct access to the entire lending business, it says in the exchange filing.

Reacting to the news, shares of Piramal Enterprises opened lower at ₹873.90, down 2.35% against the previous closing price of ₹894.95 on the BSE. In the early trade so far, the NBFC stock declined as much as 6.1% to ₹839.85, while the market capitalisation dipped to ₹19,300 crore.

For the January-March quarter of FY24, Piramal Enterprises posted a consolidated net profit of ₹137 crore compared to a net loss of ₹195.9 crore in the year-ago period. The profit was boosted by a large one-time gain of ₹1,517 crore due to the reversal of funds set aside for its investments in Alternative Investment Funds (AIF). In December last year, the Reserve Bank of India (RBI) had restricted banks and NBFCs from investing in AIFs. 

The consolidated revenue from operations grew 16% year-on-year (YoY) to ₹2,473 crore in Q4 FY24, as against ₹2,131.7 crore in the same quarter last fiscal. The net interest income, however, declined 18% YoY to ₹755 crore.

For the full financial year 2024, Piramal Enterprises posted a loss of ₹1,684 crore against a profit of ₹9,969 crore in FY23, due to the impact of AIF provisions during the fiscal. The total income dropped 21% to 3,971 crore from 5,046 crore in the previous fiscal. 

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