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MUMBAI : Ajay Piramal will underwrite the entire rights issue of 3,650 crore that his flagship company, Piramal Enterprises Ltd, announced on Friday, the billionaire businessman said in an interaction with Mint.

On Friday, Piramal Enterprises said it will raise a total of 5,400 crore through a mix of rights issue of 3,650 crore and preferential allotment of convertible instruments to Canadian pension fund manager Caisse de dépôt et placement du Québec (CDPQ), amounting to 1,750 crore.

In 2017, CDPQ had participated as the anchor investor during Piramal Enterprises’ qualified institutional placement, investing $175 million out of the total issue size of $750 million. Additionally, CDPQ’s real estate subsidiary, Ivanhoé Cambridge, has committed $250 million towards a co-investment platform with Piramal to provide long-term equity to blue-chip residential developers.

Piramal said the equity funding will help his company take advantage of the new opportunities that are available at a time when several lenders were gasping for liquidity.

“Our belief is that consolidation is taking place in the NBFC (non-banking financial services company) sector. The fittest NBFC will survive and actually do better. If you have adequate capital in a turbulent time there are many opportunities for growth," said Piramal.

There is stress in the system and one can look at acquiring books or businesses at much lower valuations, he added.

After the announcement, Piramal Enterprises shares crashed to a low of 1,425.2 apiece, before recovering to close at 1,590.4, down 7.79% from its previous close. Piramal Enterprises has priced the rights issue at 1,300 per share.

“We could have priced the rights issue at a much higher price, but then the smaller shareholders would not have come. We want everyone to participate," said Piramal, commenting on the rationale behind the pricing of the rights issue.

Piramal added that he is underwriting the entire rights issue. “If there is any shortage (in subscription) then we will step in. As far as the company is concerned the whole amount of 5,400 crore will come in as equity," he said.

The company expects the CDPQ capital to come in December and the rights issue to be completed by the end of February.

With the proposed capital raising plans, Piramal Enterprises will seek to pursue growth from diversification into new streams of businesses such as retail lending.

“We need to be more diversified. So, we are focusing on getting a whole retail franchise going, which is consumer lending and housing finance. In wholesale lending the demand is good, but we want to ensure that we meet this demand without having too much concentration. So we are now looking at a model of co-investing with other banks," said Piramal.

Piramal’s financial services business is run under Piramal Capital and Housing Finance Ltd.

The group’s financial services business grew 13% to 1,954 crore in the September quarter from a year-ago. The company’s total loan book stood at 53,055 crore at the end of the September quarter. Its housing finance loan book grew three fold to 6,393 crore. The firm’s wholesale residential real estate business constituted 48% of the loan book, with about 66% of the lending exposure toward mid-, late-stage or completed projects.

deborshi.c@livemint.com

Piramal said the funding will help his company take advantage of new opportunities at a time several lenders were short on cash.
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Piramal said the funding will help his company take advantage of new opportunities at a time several lenders were short on cash.
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