Piramal Capital & Housing Finance plans to sell a distressed loan portfolio worth Rs 2,437 crore to JM Financial ARC for Rs 1,669 crore, recovering 68 percent of its original value. The Swiss auction, employing a competitive bidding process, concluded with JM Financial ARC as the anchor bidder. This follows Piramal's recent divestment of the Rs 3,656 crore loan pool to Omkara ARC. The parent company, Piramal Enterprises, reported a loss of Rs 196 crore in Q1 2023, contrasting with a profit of Rs 151 crore a year ago. These strategic moves exemplify Piramal's commitment to optimizing its loan portfolio and navigating the financial landscape.
Piramal Capital & Housing Finance is currently engaged in discussions to divest a distressed loan portfolio valued at Rs 2,437 crore, spanning across 14 accounts, to JM Financial ARC for consideration of Rs 1,669 crore. This strategic move would yield an impressive recovery rate of 68 percent on the outstanding loan amount. Employing a cutting-edge approach, the loan was made available for acquisition through a transformative Swiss auction, employing a dynamic bidding process that ensures transparency and maximizes the asset's value. The auction concluded on June 27, with JM Financial ARC emerging as the anchor bidder as no other participants expressed interest. Hence, the loan will be transferred to the anchor bidder.
The transaction has been structured as a cash-security receipt (SR) arrangement, with 13 percent of the total value settled in cash and the remaining 87 percent in the form of security receipts. It is noteworthy that this marks the second loan divestment within a span of fewer than 10 days for Piramal Capital & Housing Finance. In a previous instance, the company successfully offloaded a pool of outstanding loans totalling Rs 3,656 crore to Omkara ARC for Rs 625 crore, resulting in a commendable recovery rate of 17 percent. These loans primarily consisted of inherited unsecured advances stemming from the acquisition of DHFL, a mortgage lender that underwent insolvency proceedings.
Furthermore, it is essential to highlight that Piramal Enterprises, the parent company, faced a financial setback, recording a loss of Rs 196 crore in the quarter ending in March 2023, compared to a profit of Rs 151 crore during the corresponding period in the preceding year. Such market dynamics and strategic manoeuvres reflect the company's commitment to optimizing its loan portfolio, driving recovery rates, and adapting to the ever-evolving landscape of the finance industry.
Piramal Capital & Housing Finance Limited (PCHFL), a subsidiary of Piramal Enterprises Limited, is a registered housing finance company specializing in a range of financial services. With a focus on real estate, PCHFL offers housing finance, structured debt, construction finance, and flexible lease rental discounting. It also caters to the hospitality sector with tailored financing solutions. In addition, PCHFL operates in the non-real estate sector through its Corporate Finance and Emerging Corporate Lending divisions, providing customized funding options to companies in various sectors, including infrastructure, renewable energy, and SMEs. PCHFL aims to meet diverse funding needs and drive growth across industry segments.
Distressed debt investing is when investors buy debt from companies that are struggling financially, usually at a lower price than the original value. The goal is to find debt that is priced lower than it should be based on the potential for the company to improve its financial situation. By investing in distressed debt, investors hope to benefit from the possible recovery and increase in the value of the debt over time.
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