In a significant development for the Piramal Group, the National Company Law Tribunal (NCLT) Mumbai bench has given its approval to the composite scheme of arrangement between Piramal Enterprises Limited (PEL) and Piramal Finance Limited (PFL). This corporate restructuring marks a pivotal moment in the group's strategy to streamline its financial services operations.

Key Highlights of the Merger

• The NCLT Mumbai bench sanctioned the merger on September 10, as per the order uploaded on September 11.
• Piramal Enterprises Limited will amalgamate with Piramal Finance Limited, its wholly-owned subsidiary.
• The appointed date for the merger is set as April 1, 2024.
• A record date of September 23 has been fixed for the issuance and allotment of equity shares of Piramal Finance to PEL shareholders.

Rationale Behind the Merger

The merger is driven by several strategic considerations:

1. Regulatory Compliance: PFL, previously registered as a Housing Finance Company (HFC), has been converted to a Non-Banking Financial Company - Investment and Credit Company (NBFC-ICC) due to not meeting the Principal Business Criteria for HFCs. The merger ensures compliance with RBI regulations that prohibit multiple NBFC-ICCs within the same group.

2. Listing Requirement: As an upper layer NBFC, PFL is required to be listed by September 30, as per RBI's Scale Based Regulations. The merger facilitates this listing requirement.

3. Operational Efficiency: The amalgamation is expected to lead to a seamless transition, given PFL's larger scale of operations and wider geographical presence. PFL accounts for 79.90% of the combined interest income and 77.20% of the assets under management of both entities.

4. Unified Approach: The merger will result in a unified platform for customer interactions and lender engagement, simplifying operations and enhancing service experiences.

5. Financial Consolidation: The creation of a larger consolidated financial services entity is anticipated to deliver an increased range of financial products to a broader customer base, benefiting from economies of scale and operational efficiencies.

Implications for Shareholders and Stakeholders

• Shareholders of Piramal Enterprises Limited will receive equity shares in the merged entity, Piramal Finance Limited.
• The merger is expected to optimize the capital structure and maximize shareholder value.
• All liabilities of PEL will be transferred to PFL, and employees will be transitioned without any break in service.

Regulatory Approvals and Compliance

The merger has received approvals from various regulatory bodies, including:

• Reserve Bank of India (RBI)
• Securities and Exchange Board of India (SEBI)
• BSE Limited and National Stock Exchange of India Limited

The companies have undertaken to comply with all applicable laws and regulations, including those related to accounting standards, stamp duty, and tax obligations.

Management Changes

In a separate announcement, Piramal Enterprises Limited disclosed that Mr. Anand Vardhan, Group General Counsel and part of the Senior Management Personnel, has resigned from the company. His last working day is set for September 29.

As the Piramal Group moves forward with this significant restructuring, the financial services landscape in India watches closely. The merger is poised to create a stronger, more streamlined entity in the non-banking financial sector, potentially setting a precedent for similar consolidations in the industry.

Piramal Enterprises has reported a robust quarterly performance, showcasing significant growth across its key business segments. The company's strategic moves, including the DHFL merger, have contributed to its expanded scale and improved financial metrics.

Strong Revenue Growth

Piramal Enterprises delivered an impressive 20% year-on-year revenue growth, with total revenues reaching Rs. 3,816.00 crores. This growth was driven by strong performances in both the Financial Services and Pharma segments.

Financial Services Segment Performance

The Financial Services segment demonstrated remarkable progress:

• Gross income increased by 25%
• Overall loan book grew by 31% to Rs. 60,600.00 crores
• Retail Assets Under Management (AUM) quadrupled to Rs. 21,500.00 crores
• Retail share of AUM rose from 12% to 36%

DHFL Merger Impact

The approval of the DHFL merger has significantly expanded Piramal Enterprises' scale:

• The DHFL acquisition is yielding over 11% with borrowing costs at 7%, creating a 4% spread
• 3,000 DHFL employees were retained, and an additional 2,000 were hired
• Loan originations restarted at most branches
• Disbursements grew five-fold year-on-year to Rs. 739.00 crores

Pharma Segment Growth

The Pharma business also showed strong performance:

• Revenue growth of 18%
• Nine-month revenues reached Rs. 4,500.00 crores
• CDMO business faced execution challenges due to supply chain constraints and raw material availability
• CDMO order book grew by 32%
• The company expects near 20% growth for the overall Pharma business in FY22

Profitability and Future Outlook

• Normalized net profit grew by 14% to Rs. 888.00 crores
• The company is implementing a twin-engine strategy combining secured lending and embedded finance
• The demerger into separate entities is expected to complete in Q3 FY23

Piramal Enterprises' strong performance across its business segments, coupled with the successful integration of DHFL, positions the company for continued growth. The expansion in retail AUM and the robust performance of the Pharma segment demonstrate the company's ability to capitalize on diverse business opportunities.