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After Kotak, Piramal to set up fund to bail stressed assets

Billionaire industrialist Ajay Piramal-led Piramal Enterprises plans to set up a fund to invest in stressed assets in the country for which it is in talks with global fund houses.

business Updated: May 17, 2016 11:27 IST
Nachiket Kelkar
Ajay Piramal says that the Piramal Group has plans for investments in stressed assets and is exploring the possibility of setting up a fund to do so.
Ajay Piramal says that the Piramal Group has plans for investments in stressed assets and is exploring the possibility of setting up a fund to do so.(Livemint)

Billionaire industrialist Ajay Piramal-led Piramal Enterprises plans to set up a fund to invest in stressed assets in the country for which it is in talks with global fund houses.

“The banking sector has lot of stressed assets…This is an area that we will look at. We will in all probability have a fund, which will invest in it and we will get some global partners with us in this fund,” Ajay Piramal, chairman, Piramal Enterprises said on Monday.

The company is looking to launch the fund in the current financial year, said Piramal adding that while the company has been looking at stressed assets on a continuous basis, no investments have been made so far. He refused to share the size of the fund.

The company will look at stressed asset in sectors including infrastructure and real estate. “We will look to invest, turn these stressed assets around and thus create value,” said Piramal.

The company will hire a separate team to run the fund.

In March this year, Kotak Mahindra Bank tied up with Canadian Pension Plan Investment Board to launch a $525 million fund to invest in stressed assets in India.

Such funds could become a lifeline at a time when equity markets are volatile and banks are reluctant to lend due to rising non-performing assets (NPA).

Primarily a pharma firm, Piramal sold its domestic formulations business to US-based Abbott Laboratories for about `17,500 crore in 2010. Over the years, it has expanded into newer areas such as financial services, real estate funding and private equity.

In April, it invested `256 crore in Gujarat-based cement company Sanghi Industries. The company is reportedly to be one of the bidders for Lafarge’s cement assets. “We will look at it (the Lafarge deal). If it makes sense, we will see,” Piramal said.

Meanwhile, Piramal Enterprises plans to demerge financial services, as it looks to further grow the business. The company’s revenue from financial services almost doubled to `1,864 crore from `937 crore in 2015-16. It accounted for about 28% of Piramal Enterprises net sales of `6,610 crore last fiscal.

“Piramal Enterprises is a conglomerate today and hence may seem to be complex and difficult to understand. It is our intent to simplify the structure going forward and create focused businesses in the process also unlocking value for our shareholders,” said Piramal.

He said the separation of financial services should be completed in the medium term.

The company’s loan book in financial services surged 174% year-on-year to `13,048 crore as on March 31, 2016 from `4,766 crore a year earlier, driven by its entry into construction finance. Its gross NPAs stood at 0.91%. It also had `8,717 crore in gross assets under management.