Piramal Finance Private Limited

Instrument Amount
(in Rs crore)
Rating Action
Sep-13
Long term bank facilities (backed by PEL) 600.00 [ICRA]AA(SO)! (Stable) reaffirmed
Non Convertible Debentures (backed by PEL) 200.00 [ICRA]AA(SO)! (Stable) reaffirmed
Commercial Papers 100.00 [ICRA]A1+ reaffirmed

ICRA has reaffirmed conditional rating of [ICRA]AA(SO) [pronounced as ICRA double A (Structured
Obligation)] to the fully guaranteed bank lines of Rs 600 crores and Non Convertible Debentures of Rs
200 crores of Piramal Finance Pvt. Ltd.(PFPL).
*
The outlook on the rating is stable. The letter SO in
parenthesis suffixed to a rating symbol stand for Structured Obligation. An SO rating is specific to the
rated issue, its terms, and its structure. SO ratings do not represent ICRAs opinion on the general
credit quality of the issuers concerned. The conditional rating is subject to PFPL ensuring compliance
with the structure submitted to ICRA and the conditions / payment mechanism. ICRA has also
reaffirmed a rating of [ICRA]A1+ to the Commercial Paper Programme of Rs 100 crores of PFPL.

The ratings factor in the strength of the Promoters namely Piramal Enterprises Limited (PEL) rated
[ICRA] AA/Stable/A1+ and the likely financial and managerial support to the company. Being part of
the Piramal Group, the company is expected to enjoy good financial flexibility despite its business
model revolving around the perceived riskier segment of funding real estate projects. The ratings also
factor in the presence of strong and experienced senior management team.These strengths are,
however, partially offset by the moderate track record and the attendant credit & concentration risk
associated with a wholesale funding business model. ICRA notes the companys plans to diversify its
geographic presence and business lines to broad-base its credit book. Going forward, the companys
ability to execute its business plans and grow profitability, ability to raise funds at competitive rates for
growing the portfolio, and ability to maintain healthy asset quality would remain key sensitivities.

The long term ratings further factor in an explicit unconditional and irrevocable guarantee from the
parent for timely servicing of the debt. The ratings address the servicing of the loan and NCD to
happen as per the terms of the underlying loan/NCD and the guarantee arrangement. Furthermore, the
ratings assume that the guarantee will be duly invoked, as per the terms of the underlying loan/NCD
and guarantee agreements, in case there is a default in payment by the borrower. The standalone
short term rating factors also in the companys commitment to maintain adequate backup liquidity in
terms of unutilised bank lines which are in turn guaranteed by the parent.

Piramal Finance is promoted by Ajay Piramal Group. The group diversified into financial services
sector in FY12 after the sale of healthcare solutions business to Abbott in Sep-10. Accordingly, PEL
set up a wholly owned subsidiary, PHL Capital Pvt Ltd, in order to hold all the investments in financial
services sector. PHL Capital, holds 100% in Piramal Finance. The group plans to have significant
presence in financial services sector, providing finance to Real estate, and Education sectors. The
group is looking to leverage on its domain knowledge in the real estate sector. The group has strong
presence in the real estate sector through Piramal Realty, promoted by Mr. Ajay Piramal, INDIAREIT
Fund Advisors Pvt. Ltd. and INDIAREIT Investment Management Company. INDIAREIT Fund
Advisors Pvt. Ltd. are advisors to the INDIAREIT Fund which is a domestic real estate private equity
fund focused on the Indian markets and INDIAREIT Investment Management Company is manager to
offshore real estate private equity funds investing in India through the FDI route. Further, in the
financial services space the group has acquired approximately 10% strategic stake in Shriram
Transport Finance Company Limited.




*
For complete rating scale and definitions please refer to ICRA's Website www.icra.in or other ICRA Rating
Publications



The lending operations of the company started from FY12 and the company had book size (including
investments in NCDs) of ~Rs. 896 crore as on June 30, 2013. Following the capital infusion in Q2
FY12-13 and internal accruals, PFPLs net worth stood at Rs 472 crores as on June 30, 2013 and
accordingly, it can take exposures up to ~Rs. 70 crore. Currently, exposures through Term loan route
are mostly taken on PFPLs books. PFPL also manages few Structured Investments of PEL.

PFPLs lending book stood at ~Rs 896 crores as on June-13. Real estate sector accounts for 83% of
the book while the remaining consists of education loans. Within real estate, the companys focus has
been mainly on the residential projects while exposures to commercial projects have been few and
selective. By geography, the company exposures have been in metropolitans of Mumbai, Bangalore,
Chennai, Pune, NCR and Coimbatore. The company has put in place risk management processes with
each proposal being approved by the credit committee. In terms of asset quality, the company has
reported nil Gross and net NPAs as at June 30, 2013. The companys ability to grow its book while
maintaining asset quality remains a key rating sensitivity.
In FY 13, PFPL reported PAT of Rs 44 crores vis-a-vis Rs 5.3 crores in FY 12. The net worth of the
company stands at Rs 450 crore as at March 31, 2013 and RoNW for FY 13 was ~15%. The capital
adequacy ratio (entirely Tier I capital) stands at 46.6%. For Q1 FY14, the company reported a PAT of
Rs 20.5 crores.

Company profile
About Piramal Finance Pvt. Ltd.
Established in 2011, PFPL is a non banking financial services company (NBFC) and is categorized as
a non-deposit taking systemically important (ND-SI) NBFC by Reserve Bank of India (RBI). The
company was earlier known as Glass Engineers Pvt. Ltd. The company is engaged in the business of
lending to (a) Real Estate and (b) Education Projects, in Mumbai, Pune, Chennai, Bangalore and NCR
region. It is also gradually expanding in other locations. The company belongs to Mumbai based
Piramal Group with diversified business interests across pharmaceuticals, packaging, financial
services and real estate. The company has a lending book (including investments in NCD) of ~Rs. 896
Crores as on June 30, 2013. The net worth of the Company is Rs. ~472 crore as on 30-Jun-13.

About Piramal Enterprises Limited
PEL is part of the Ajay Piramal group of companies. The Group is a diversified Indian business house
with interests in healthcare, glass manufacturing and real estate. In 1988, the group acquired Nicholas
Laboratories (NL), which was a Sara Lee group company (NL was incorporated in 1947 to
manufacture pharmaceutical formulations by the Nicholas Kiwi group). Following its acquisition, the
group changed NLs name to Nicholas Piramal India Limited. Subsequently, the company continued to
grow by acquisitions a pattern that has been historically followed by the group acquiring Roche
Products India in 1993, Sumitra Pharma in 1994, Boehringer Mannheim in 1997, R&D division of
Hoechst in 1998, Rhone Poulenc India in 2000-01, the pharma division of ICI in 2002, and Sarabhai
Piramal (remaining 50% stake) in 2003-04. In recent years, the company has also undertaken
acquisitions in the critical care and OTC segments in order to strengthen their product profile and
geographic presence. In May 2010, PEL announced the sale of its domestic formulation business
which manufactures, markets and sells branded pharmaceuticals in India, Nepal and Sri Lanka to
Abbott for a total consideration of US$ 3.8 billion. PEL also sold its majority stake (97.5%) in Piramal
Diagnostic Services Private Limited (PDPSL) to Super Religare Limited for a total consideration of Rs.
600 crore discharged through mix of cash, stock, debentures and assuming debt. As a result PELs
business is currently undergoing a transitional stage with the management scouting for investment
opportunities to deploy the surplus cash. Towards this end, the company recently announced plans to
foray into the financial services industry through the formation of two NBFCs, acquisition of group
owned real estate fund management companies and short term investment in Vodafone Essar Limited
(10.97% stake) at Rs. 5864 crores. During March 2011, the company executed buy-back of equity
shares to the tune of Rs. 2500 crores. In May 2012 PEL announced acquisition of Decision Resource
Group which is into healthcare information and analytics space at an Enterprise Valuation of Rs. 3400
crores approximately. Presently, PELs presence in healthcare is restricted to CRAMS, critical care,
OTC and novel drug discovery. In May 2013, PEL announced acquisition of approximately 10%
strategic stake in Shriram Transport Finance Company Limited at an outflow of approximately Rs.
1,634 crore.



Recent Results
On a consolidated basis, PEL reported Operating Income of Rs. 3502.0 crore, OPBDITA of Rs. 416.6
crore and Profit after Tax of Rs. (217.5) crore in FY13.
September 2013

For further details please contact:
Analyst Contacts:
Mr Karthik Srinivasan (Tel. No. +91 22 61796365)
karthiks@icraindia.com

Relationship Contacts:
Mr. L. Shivakumar (Tel. No. +91-22- 61796393)
shivakumar@icraindia.com


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