Piramal Enterprises Ltd is seeking an additional investment of Rs.7,000 crore through a qualified institutional placement (QIP) and rights issue. Of the total required investment, nearly Rs.5,000 crore will be raised through QIP and the rest through rights issue. As a part of the transaction, the company has allocated compulsorily convertible debentures (CCD) to be sold at a coupon rate of 7.9%.
The company has fixed a conversion price of Rs.2,690 per equity share, while the floor price of an equity share is set at Rs.2,688.35. The CCDs come with a maturity period of 18 months. Following this period, these debentures can be converted into shares by investors. This conversion will dilute the company’s equity by 10%.
Nearly 50% of the QIP will be raised from American investors. About 35% will be raised from Asian investors and the rest from European investors. Piramal Enterprises will invest majority of the funds in its financial services sector. The company provides financial services through its subsidiaries including Piramal Capital, Piramal Finance, Piramal housing finance, and Corporate finance group. Some of the funds raised from this process will also be infused into the company’s pharmaceutical segment.
With CCDs, investors can protect their investments as they are bound to get returns on their investment irrespective of the share price at the time of conversion.
According to Group Chairman Ajay Piramal, this is the largest QIP fundraising undertaken by a non-banking institution in India. He also pointed out that this is the first time ever CCDS will be issued in such fundraising activity.
Mumbai-based Piramal Enterprises is a conglomerate with operations in pharmaceutical, financial services, biotech research, real estate, information management, etc. Through this fundraising, the company focuses on improving its financial services wing. Various institutions such as Kotak Mahindra, Citigroup, Morgan Stanley India, and Motilal Oswal Investment Advisors will be overseeing this QIP.