Piramal Enterprises Raises Rs 14,500 Crore Via Various Measures In FY20
Ajay Piramal, chairman of Piramal Enterprises (Photographer: Dhiraj Singh/Bloomberg)

Piramal Enterprises Raises Rs 14,500 Crore Via Various Measures In FY20

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Piramal Enterprises Ltd. raised Rs 14,500 crore through various measures in the last financial year helping the company deleverage its balance sheet, according to the company's Annual Report for 2019-20.

Sharing information with shareholders, the company's Chairman Ajay Piramal said that despite challenging business environment, the firm succeeded in surpassing its fundraising target that was set at the start of the last financial year.

"At the beginning of the year (last fiscal), we had committed to bringing in Rs 8,000 to Rs 10,000 crore of equity into the company. Despite this adverse environment, we exceeded our commitment and were able to bring in Rs 14,500 crore of capital during the year," Piramal said.

These measures have not only enabled the company to increase the equity base from Rs 27,224 crore to Rs 30,572 crore but it has also helped to significantly deleverage the balance sheet, he added.

The Mumbai-based company, which has a presence in financial services and pharma, raised capital through various means.

The company raised Rs 1,750 crore from preferential allotment of compulsorily convertible debentures to CDPQ, an existing long-term investor.

Further, it raised Rs 3,650 crore through rights issue, Rs 6,800 crore from the sale of the healthcare insights and analytics business, Rs 2,300 crore from from the sale of 10 per cent stake in Shriram Transport Finance.

"In the beginning of the year (last fiscal), we made a few clear choices and implemented them rigorously, which make us well-positioned to navigate these challenging times. Some of these measures that we implemented include deleveraging the business, strengthening the balance sheet and simplifying the corporate structure to focus on our two core businesses -- pharma and financial services," Piramal said.

With low leverage level, conservative provisioning and enough liquidity, the company's financial services business remains well-positioned to gradually transform its business model from being a largely wholesale lender to becoming a well-diversified lender with a much granular loan book, he added.

"I believe we are now at an important inflection point. Having significantly strengthened our balance sheet and maintaining a strong liquidity position, we are confident that PEL will be among the few sizable companies that will emerge even stronger post the COVID-19 crisis," Piramal said.

He added that the past 18 months have been challenging for non-banking financial companies (NBFCs).

The sector was impacted by a system-wide liquidity tightening, as well as negative business news from large corporates, not necessarily from within the sector, Piramal said.

The situation had further worsened due to COVID-19, making this one of the most prolonged crises for the sector, he noted.

"While the business environment has been gradually improving lately, uncertainties remain. Given the significance of the NBFC sector, both the Reserve Bank of India and the Government of India introduced multiple measures to reduce the stress in the economy," Piramal said.

Those measures, to a certain extent, have eased business conditions and assisted NBFCs/HFCs to build adequate liquidity, reduce asset-liabilities management mismatches and improve their focus on asset quality, he noted.

"We expect that this prolonged crisis will enhance the speed and extent of the ongoing consolidation in the NBFC sector. Only strong, well-capitalised and well-governed NBFCs will be able to withstand this prolonged crisis," Piramal said.

Commenting on the pharma segment, he said it remains one of the safest and most-resilient industries in this period of uncertainty.

"The recent strategic growth investment is an affirmation of the underlying strength of the business and will provide us with a war chest for the next phase of our strategy," Piramal noted.

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