Piramal Enterprises To Set Aside Provisions For Rs 3,164-Crore AIF Exposure

Piramal Enterprises Ltd. will set aside provisions against Rs 3,164 crore worth of investments in alternative investment funds after the banking regulator tightened rules lenders to curb evergreening of loans.

Piramal Enterprises and its subsidiary Piramal Capital & Housing Finance Ltd. have an exposure of Rs 3,817 crore in AIFs as of Nov. 30, the company said in a regulatory filing on Dec. 21.

Of this, Rs 653 crore pertains to AIFs "that have no exposure to any debtor companies” of Piramal Enterprises, it said. “Taking a conservative view of the regulatory intent”, the company will adjust Rs 3,164 crore in “our financial statements through capital funds or provisions”, it said

The Reserve Bank of India on Tuesday directed banks and non-bank finance companies to liquidate their holdings in alternative investment funds which have downstream investments in debtor companies. The move is aimed to "address concerns relating to possible evergreening through this route", the practice of extending new or additional loans to a borrower unable to repay the existing liabilities by concealing the true status of non-performing assets.

Piramal Enterprises said of the Rs 3,164 crore it will provide for, Rs 1,737 crore worth of downstream investments have been made by the AIF into three debtor firms on Piramal Enterprises books in the last 12 months.

The non-banking financial company received Rs 905 crore so far as the repayment of interest and principal on these AIF units, it said. "We remain confident of full recovery of the underlying downstream investments in the impacted AIF units".

In the September quarter, the company's consolidated net worth stood at Rs 28,710 crore, and its capital adequacy ratio was at 31%.