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Piramal Group skilfully divested distressed loans worth Rs 531 crore, linked to its Advantage Raheja exposure, encompassing prestigious properties like the JW Marriott in Bengaluru and Crowne Plaza in Pune. Omkara Asset Reconstruction Co. assumed ownership, converting these loans, once recorded as security receipts (SR), into cash assets. This strategic shift furthers Piramal's agenda, yielding substantial gains. Notably, this transaction bore the hallmark of a highly lucrative endeavour for Piramal, as it was negotiated at a premium, ultimately leading to a substantial gain exceeding Rs 700 crore.
Prior to this sale, these loans had been previously transferred to Omkara ARC, with Omkara making partial payments to Piramal, entailing both cash disbursements and the issuance of security receipts. The redemption of these security receipts would be contingent upon the recovery of the loans. Subsequently, Piramal embarked on a strategic decision to put security receipts amounting to Rs 531 crore up for sale, a portfolio originally acquired by Omkara ARC for an all-cash payment. Piramal initiated a competitive bid process, and Omkara came forth with a compelling proposal, offering to acquire these security receipts at a premium through an all-cash transaction.
Piramal, recognizing the strategic merit of this proposition, opted to divest the security receipts from its balance sheet. Initially, these loans were sold with a 15:85 structure, where 15% was paid in cash and the remaining 85% was issued as security receipts. Omkara ARC made an initial cash payment of around Rs 100 crore, with the remaining Rs 531 crore designated as security receipts. These security receipts, akin to quasi-debt instruments, are provided by asset reconstruction companies (ARCs) as loans are recovered. At present, spokespersons representing both Piramal and Omkara have chosen to withhold official comments on the particulars of this transaction.
In a separate financial move, Piramal successfully divested a pool of outstanding loans, collectively valued at Rs 3,656 crore, to Omkara ARC. This transaction culminated with the group achieving a commendable 17% recovery rate, thus illustrating the strategic acumen that Piramal has exercised. Piramal's current strategic thrust involves creating an innovative asset-backed wholesale portfolio, known as 'Wholesale 2.0,' with a strong focus on real estate and corporate mid-market lending. This approach entails prudent handling of legacy non-performing assets (NPAs), including those obtained through the DHFL acquisition.
The company remains steadfast in its commitment to resolving stressed loans and improving asset quality, resulting in a noticeable reduction in the wholesale segment's Asset Under Management (AUM) in recent quarters. Aligned with their overarching growth strategy, the management at Piramal is keenly focused on a prospective doubling of their balance sheet over the forthcoming five years, with a particular emphasis on adopting a retail focused approach. This strategic shift is poised to secure a 70% retail share by the close of fiscal year 2028.
In this regard, Piramal has been vigilant in introducing stringent underwriting norms for the unsecured book segment, a prudent move given the prevailing industry conditions marked by heightened leverage in this sector, a safeguarding measure that was instituted in November 2022.
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