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A day after the shares of Piramal Capital and IIFL Finance felt the impact of the RBI’s new regulations on AIF investments, the companies declared their exposure to assuage investors and stakeholders, with the former saying that it plans to provide for its entire AIF exposure, including that not impacted by the norms.
Piramal Enterprises said along with its subsidiaries, it has a total AIF exposure of ₹1,737 crore as applicable under the RBI norms whereas IIFL Finance said it has consolidated exposure worth ₹182 crore.
The RBI, on December 19, tightened norms for AIF investments by banks and NBFCs, banning them from investing in such funds that have invested in debtor firms to which the lenders had exposure in the prior 12 months. Further, lenders have been asked to either liquidate these investments in 30 days or make 100 per cent provisions against them.
Jefferies in a report said that while AIF exposure for banks is nil to nominal, Piramal Enterprises has an exposure of ₹ 4,500 crore, accounting for 7 per cent of its AUM, whereas IIFL Finance has exposure of ₹1,100 crore, comprising 2 per cent of the AUM. However, it added that the bulk of this exposure is to accounts that had borrowed from NBFCs before the applicable time period.
Following this, shares of Piramal Enterprises fell 7.9 per cent and of IIFL Finance by 6.7 per cent on December 20. On December 21, the Piramal Enterprises’ stock closed 0.2 per cent lower at ₹883.50 on the NSE whereas IIFL Finance ended 3.4 per cent down at ₹598.
AIF exposure
Piramal Enterprises has clarified that together with its subsidiaries, it has invested ₹3,817 crore in AIFs as of November 2023, of which ₹653 crore pertains to funds that have no exposure to debtor companies. Of the remaining ₹3,164 crore, ₹1,737 crore of downstream investments are in three entities that were debtor companies in the last 12 months.
“Taking a conservative view of the regulatory intent, Piramal Enterprises intends to adjust the entire ₹3,164 crore in our financial statements through capital funds or provisions,” it said. The NBFC has so far received ₹905 crore as repayment of interest and principal on these units and remains confident of “full recovery of the underlying downstream investments in the impacted AIF units”.
IIFL Finance said that it has consolidated investment of ₹21.37 crore in IIFL Fintech Fund, and outstanding debt exposure of ₹3.28 crore to one of the fund’s downstream investments. Other AIF investments worth ₹909.81 crore do not include any downstream investments or exposure taken in preceding 12 months.
Further, subsidiary IIFL Home Finance has invested ₹161.07 crore under ‘Priority Distribution Model’, which if not liquidated will require 100 per cent deduction from the capital.
“However, the subsidiary is adequately capitalised having a CRAR of 47.55 per cent as on September 2023 and the impact of this deduction shall reduce the CRAR to 46.39 per cent, reflecting a marginal impact of 1.16 per cent,” it said.
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