Ajay Piramal Promoter Entity AASAN Downgraded By ICRA
AASAN is wholly owned by Sri Govinda Trust through its trustee, Ajay Piramal.
The rating on Rs 1,900 crore worth of outstanding non-convertible debentures issued by AASAN Corporate Solutions Pvt. Ltd. was downgraded to A- from A+ by rating agency ICRA.
AASAN is wholly owned by Sri Govinda Trust through its trustee, Ajay Piramal, the promoter of the Piramal Group. It is engaged in the business of investing and lending to group companies and other entities engaged in real estate and leasing, and trading in commodities such as gold and silver.
The rating revision was “driven by the deterioration in the operating environment owing to tight liquidity in the market, that may diminish the resource mobilisation ability of the holding / investment entities to raise funds from the market,” the ICRA statement said. “Furthermore, the company may need to refinance a significant quantum of debt due for repayment in FY2020 given the limited standalone financial strength of the company.”
The NCDs have been issued in multiple tranches and have a scheduled tenor of upto 3 years from the deemed date of allotment, ICRA said. The credit-enhanced instruments are guaranteed by The Sri Krishna Trust and PRL Realtors LLP, which in turn derive their strength from having a close to 44 percent shareholding in Piramal Enterprises Ltd., the group flagship.
While the rating agency emphasised the guarantees are irrevocable and unconditional, as well as small compared to the market value of the PEL stake (Rs 14,700 crore as on Oct. 31, 2019), it also highlighted “the muted sentiment in the real estate sector” and “refinancing risks given the high repayments due in the near-term”.
Of the total guaranteed debt of Rs 1,675 crore as on Oct. 31, 2019, Rs 1,350 crore is due for repayment in FY2020.
Apart from repayments of debt of promoter entities, Piramal would also require cash to invest in the rights issue of Piramal Enterprises recently approved by the company’s board. The company approved total fund raising worth Rs 5,400 crore of which Rs 3,650 crores was to be raised via a rights issue and the balance via a preferential allotment to Canadian institutional investor, Caisse de dépôt et placement du Québec.
The rights issue proposes at Rs 1,300 per share is expected to be completed by February 2020 according to company filings. This indicates the promoters would in aggregate require over Rs 3,000 crore to fund the purchase of rights as well as upcoming debt payments.
Piramal Promoter Entities’ Capital Requirement In FY20
- Aasan debt repayment: Rs 1,350 crore
- Rights issue contribution: Rs 1,683 crore
- Total Funds Needed: Rs 3,033 crore