Mumbai: Piramal Enterprises Ltd (PEL) plans to raise about Rs7,000 crore through a qualified institutional placement (QIP) and rights issue by the end of March, the firm said on Wednesday. It will be utilizing the proceeds mainly to strengthen its financial services business.
The Rs4,996.2 crore QIP is being issued in the form of compulsory convertible debentures (CCDs), the first such transaction by an Indian firm. “PEL decided to issue CCDs as we did not want to dilute equity in one go. The debt will convert into equity after 18 months and will lead to about 10% equity dilution," said Ajay Piramal, chairman Piramal Group and Shriram Group at a press conference.
Piramal also said that the investors can convert their debt into equity at any point of time. “The coupon on the debentures is about 7.9%," he said. PEL has approved a conversion price of Rs2,690 per share.
The company is also raising about Rs2,000 crore through a rights issue. “We also want our existing shareholders to be a part of our growth story. We have underwritten 90% of the issue which shows our confidence in the business," Piramal said.
During the current fiscal, part of the proceeds will be utilized for a recently launched housing finance company and stressed asset fund that PEL has launched in partnership with leading credit specialist firm Bain Capital Credit.
“About Rs1,000 crore will be invested in the HFC. $100 million will go towards the stressed asset fund," Piramal said.
Piramal Finance, the non-banking financial company of Piramal Group, received a licence for housing finance business on 4 September. Piramal Housing Finance is offering home loans through realty developers as well as directly to retail customers.
In August last year, PEL and Bain signed a memorandum of understanding to invest in stressed assets in India. Piramal group has applied for an asset reconstruction company licence as well and is awaiting approval from the Reserve Bank of India.
PEL will be exploring acquisition opportunities in pharmaceutical space as well. “We have some niche pharmacy products and have not faced any regulatory issues from USFDA (US Food and Drug Administration). We are seeing stress in the pharmaceutical space and so opportunities are likely to open up there," PEL said.
For the QIP, nearly 50% of investors are from North America, 35% from Asia and 15% from Europe. “We have received interests from large global funds, especially pension funds for the QIP," Piramal said. The issue is expected to close on 25 October.
Kotak Mahindra Capital Ltd, Citigroup Global Markets India Pvt. Ltd, Morgan Stanley India Co. Pvt. Ltd and Motilal Oswal Investment Advisors Ltd are managing the QIP.
“The funds raised will be sufficient for the next 3-4 years," PEL said.