Description

Piramal Finance Limited modifies coupon step up/down mechanism and mandatory redemption trigger for its debt securities, changing rating thresholds and coupon adjustments.

Summary

Piramal Finance Limited has updated the terms and conditions of its debt securities, modifying the coupon step up/down mechanism and mandatory redemption event triggers. The changes include revised rating thresholds for coupon adjustments and modified mandatory redemption criteria.

Key Points

  • Modified coupon step up mechanism with differentiated rates for different rating levels
  • Changed mandatory redemption trigger from four notches to three notches rating downgrade
  • Updated coupon step down provisions for rating upgrades
  • Applies to existing debentures/NCDs of Piramal Finance Limited

Regulatory Changes

Coupon Step Up/Down Mechanism:

  • Previous: 0.25% increase per rating notch downgrade below AA rating
  • Updated: 0.25% increase per notch from AA to A+, then 1.00% increase for downgrade from A+ to A
  • Step down provisions similarly revised with 1.00% reduction for A to A+ upgrade and 0.25% per notch from A+ to AA

Mandatory Redemption Event:

  • Previous trigger: Rating downgrade to four notches below current AA rating (i.e., A- or below)
  • Updated trigger: Rating downgrade to three notches below current AA rating (i.e., A or below)

Compliance Requirements

  • Piramal Finance Limited must implement the revised coupon adjustment mechanism
  • Updated terms apply to existing debt securities holders
  • Most conservative rating among agencies to be considered for calculations
  • Company must mandatorily redeem debentures if rating falls to A or below

Important Dates

  • Effective Date: As per the circular dated August 8, 2025
  • Changes apply to existing debt securities immediately upon implementation

Impact Assessment

For Investors:

  • Enhanced protection through earlier mandatory redemption trigger (3 vs 4 notches)
  • More nuanced coupon adjustment mechanism with higher penalties for lower ratings
  • Improved risk management for bondholders

For Piramal Finance:

  • Higher cost of borrowing if ratings deteriorate significantly
  • Earlier redemption obligations in case of rating downgrades
  • More stringent financial discipline required to maintain ratings

Impact Justification

Significant changes to debt instrument terms affecting coupon payments and redemption triggers for existing bondholders