Banking News

Piramal Enterprises to make provisions for Rs 3,164 cr AIF exposure as RBI tightens rules


Piramal Enterprises said it would provide for more than Rs 3,000 crore of its investments in alternative investment funds (AIFs) which have invested in companies it has lending exposures. This would impact the company’s earnings for the fiscal year with analysts estimating a loss over Rs 2200 crore for FY24, while the more than 30% capital adequacy should help it business growth.

The non-bank lender has total investments of Rs 3817 crore in AIF units, of which Rs 653 crore have no exposure to the company’s debtors and therefore remains unaffected by the recent regulatory directions on AIFs. Of the remaining Rs 3164 crore, Rs 1737 crore worth of downstream investments have been made by the AIF into three entities that have been Piramal’s debtors during the last 12 months.

The Reserve Bank of India on Tuesday directed banks and non-banking finance companies to stop investing in AIFs having investments in any company which has borrowed from the same bank or NBFC. In case, they already have investments in such AIFs, then they have to make full provision against it or the investment has to be liquidated.

This may materially impact the company’s profit and loss account in FY24, Emkay Global Financial Services said. “We now estimate FY24 losses at Rs 2284 crore,” it said in a note.

“We remain confident of full recovery of the underlying downstream investments in the impacted AIF units,” Piramal said, adding that the company received Rs 905 crores so far as repayment of interest and principal on these units.

Meanwhile, IIFL Finance said that its subsidiary IIFL Home Finance holds investments of Rs 161 crore under “priority distribution model” in AIF which if not liquidated shall require 100% deduction from its capital. The mortgage lender had capital adequacy at 47.55% at the end of September and due to the regulatory change the ratio would reduce by 1.16 percentage point.There is a Rs 21.4 crore investment in IIFL Fintech fund where the company has outstanding debt exposure of Rs 3.3 crore in one of the downstream investments of the fund.IIFL said all other AIF investments of it totalling Rs 910 crore does not include any downstream investments to which it has a loan or investment exposure and therefore no provisioning would be required.


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