Updated December 21st, 2023 at 12:48 IST
Piramal Enterprises to provision for AIF exposure as RBI tightens rules
Within the AIF investments, Rs 653 crore is attributed to funds without exposure to debtor companies of Piramal Enterprises.
Piramal Enterprises announced its decision to make provisions for certain exposures related to investments in alternate investment fund (AIF) units, following the recent tightening of regulations by the Reserve Bank of India (RBI). The move comes in response to the RBI's directive prohibiting all entities, including banks and non-banking finance companies, from investing in AIFs with holdings in borrowers within the past 12 months.
As per the RBI's guidelines, regulated entities are required to liquidate their investments in AIFs within 30 days if the fund has invested in an existing borrower. Non-compliance necessitates full provisions on these investments.
As of November 30, the total value of investments made by Piramal Enterprises and Piramal Capital and Housing Finance in AIF units amounted to Rs 3,817 crore, according to the company's filing.
Within the AIF investments, Rs 653 crore is attributed to funds without exposure to debtor companies of Piramal Enterprises. The remaining Rs 3,164 crore includes investments in three entities that acted as debtor companies of Piramal Enterprises in the last 12 months.
Piramal Enterprises plans to adjust the remaining Rs 3,164 crore through capital funds or provisions and is actively engaging with relevant stakeholders to finalise the details.
Jefferies estimates Piramal's AIF exposure to represent 7 per cent of its assets under management and suggests that provisioning for it could result in a 10 per cent impact on its net worth.
Despite the challenges, Piramal has expressed confidence in the full recovery of its investments.
(With Reuters inputs)
Published December 21st, 2023 at 12:48 IST