Has the cost funds increased for PEL ? How do we check this ?
yes it has. Please check concall transcripts for Piramal from BSE website
Here is one more article on this issue.
Attaching a snapshot from this article related to PEL.
Vikas
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I am asking in Q2, beyond the 10.3% in Q1. Are they in a desperate liquidity mess based on the rates they raise funds in the market from ?
Good that reputation of PEL still intact as they are able to raise money!!
Link to CRISIL credit rating for one portion of the PTCs backed by retail home loans and LAP. What is interesting is that these PTCs are rated AAA(SO) as Piramal has provided additional security in the form of FDs and higher interest spread that what is required. Makes one wonder if they were unable to sell the PTCs with a AA rating, which is what Piramal otherwise has.
Piramal is raising capital at 8.70% interest rate for a very long period (upto 2042 ) at a time when interest rates keeps falling in india . Looks like they are in desperate need of money .
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They know that cost of capital is not going to down soon.
Data points : Bajaj capital FD/NCD are competitively prices even thought they will raise funds via QIP.
Why would an investor go for Piramal NCD when Tata Capital offers a secured NCD for 10 years at 8.85% AAA rated. It does suggest that Piramal is finding it hard to raise funds for 10 year tenor and hence they need to come up with long tenors.
Other worry is how can Piramal take such a LT view on direction of interest rates and how would they hedge this risk?
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I am not a fan of Mr. Piramal as such but it is a desperate move or not will be known in hindsight. If they make even 2% extra RoE from 8.7% interest it will be good deal for investors. Think about cost of equity in the current environment? Also need to check if it is callable at certain point of time. Letâs be clear that RE sector does need funding else prices will not decline for extended period of time which is the aim of this govt. Funding squeeze will result in crash but it wonât result in more projects being announced leading to supply crunch in the medium term.
I have heard that many projects financed by DHFL, I Bulls and Reliance Capital are stuck now which will further squeeze supply in the coming years. What Piramal and Edelweiss are doing is that they are providing last mile funding to all of their projects so that they get completed. There might be delays in recovery and higher NPA in between but I donât think they will suffer permanent losses. Both Edel and PEL have indicated the same.They typically work on 1.8-2x collateral value. In case prices crash by 30%, which is not impossible, financiers will still recover money but equity value of the project will get wiped out. In a goodwill gesture some financiers might take a hit for early recovery but it wonât give them mortal blow as Mr. Market is anticipating. What is needed is adequate liquidity for these NBFCs till projects start selling well and turn CFO positive which typically happens at the late stage of execution.
It is very clear that some projects financed by PEL are stuck for the lack of demand in the luxury or super luxury segment and the project size is too big to be financed by PEL alone. Also, a few projects financed by Edel are now open to âdiscussâ price but I have not seen any big price cut so far. Even Edel has financed few super luxury projects in Mumbai but they are very small and can be handled alone by arranging last mile funding. In short, we all need to be concerned with what is happening in real estate but I donât see price crash coming our way.
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This is old video last year this interview back on 9 Oct 2018 as per Youtube 
As per some banking sources, Piramal has been raising funds at around 15% all in price. Only hope for them is equity infusion. Banks are evaluating Restructuring the loans, if fresh funds are not raised soon.
This article is free now.
@Maachaa - Posting old links and reading it again and againâŚgives one lesson to be learned - Investor mood swing is extreme in Bull and Bear Case!
In bull - no bad news is bad but all are good and
in Bear - no good news is good but all are bad !!
But it is true that when more bullish new articles in papers, social media, YouTube for a company along with its prices in up way - thatâs time to sell and book profit ! but it is too much difficult to swim against flow!
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Now PEL is putting a timeline when they want to bring equity in the business as per above report.
Based on the report it does not looks like PEL is desperate for raising the money (I am sure they are keen on raising the money, but not desperate)
The Company remains committed to bring in ~INR 8,000-10,000 Crores of equity in the Financial Services business during this financial year, which would further reduce leverage to less than 2x times
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