Piramal to provision for AIF exposure as RBI tightens rules

Published - December 21, 2023 08:47 pm IST - Bengaluru

India's Piramal Enterprises said on Thursday it would set aside funds to cover its exposure to alternate investment funds (AIF), days after Reserve Bank of India (RBI) tightened rules governing such holdings.

RBI on Tuesday barred all entities under its regulation, including banks and non-banking finance companies, from investing in AIFs that have investments in borrowers in the past 12 months.

As per the RBI's direction, regulated entities must liquidate their investments in AIFs within 30 days should the fund invest in an existing borrower. Failure to comply mandates the entity to make full provisions on these investments.

As of Nov. 30, the value of investments made by the company and Piramal Capital and Housing Finance in AIF units was ₹38.17 billion, it said in a filing.

Within the AIF investments, ₹6.53 billion is attributed to funds with no exposure to debtor companies of Piramal Enterprises, the firm said.

Of the remaining ₹31.64 billion, ₹17.37 billion are invested in three entities that served as debtor companies of Piramal Enterprises in the last 12 months.

The company intends to adjust the remaining ₹31.64 billion through capital funds or provisions and is engaging with relevant stakeholders to finalise the details, it said.

Jefferies estimates Piramal's AIF exposure to be 7% of its assets under management and said provisioning for it could lead to a 10% hit to its net worth.

Piramal is confident of a full recovery of its investments, it said.

Meanwhile, IIFL Finance, said in a separate filing that it had an investment of ₹213.7 million in a fund with a debt exposure of ₹32.8 million. The firm's remaining AIF investments, totalling ₹9.1 billion as of Dec. 21, carry no exposure to existing debtors and will not impact its additional provisioning or capital adequacy needs, it said.

Shares of Piramal Enterprises fell 1.7% on Thursday while IIFL Finance lost about 3%.

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