Introduction
When Piramal Finance Limited (PFL) appeared on the stock exchanges without launching an IPO, it seemed unconventional at first glance. Yet, the move was entirely within the legal and regulatory framework. The merger between Piramal Enterprises Limited (PEL) and PFL, sanctioned by the National Company Law Tribunal (NCLT), Mumbai Bench, demonstrates how India’s company law and financial-sector regulation can work in tandem to achieve compliance-driven outcomes.
The Regulatory Compulsion Behind the Merger
The starting point was the Reserve Bank of India’s Scale-Based Regulatory Framework for NBFCs. In April 2025, PFL’s licence was converted from a Housing Finance Company (HFC) into a Non-Banking Financial Company-Investment and Credit Company (NBFC-ICC). RBI approved this conversion with two critical conditions:
- Only one entity within the Piramal Group could hold an NBFC-ICC licence, and
- The NBFC-ICC in the group had to be listed by 30 September 2025 as mandated for upper-layer NBFCs.
At that time, both PEL and PFL were registered NBFCs. Maintaining two NBFC-ICC licences was impermissible, and a fresh IPO by PFL within the RBI deadline was impractical. The solution was a composite scheme of arrangement that consolidated the lending business and fulfilled RBI’s mandate through a controlled restructuring route.
The Structure: PEL Merges into PFL
Under the approved scheme by NCLT-Mumbai, the listed parent company, PEL, amalgamated with its wholly owned subsidiary, PFL. Upon the scheme taking effect, PFL became the surviving entity. This reorganisation was both logical and efficient. PFL already carried the group’s lending operations, loan book, branch network and employees. The merger unified the businesses under one platform, removed duplication in compliance and governance, and brought the actual operating company under direct market supervision which was the precise intent of the RBI’s policy. But as the merger happened PEL become united as PFL was unlisted. How?
The Section 232(3)(h) Challenge and How It Was Resolved
A critical legal hurdle lay in Section 232(3)(h) of the Companies Act, 2013. The provision governs mergers where a listed company merges into an unlisted one, and it imposes a strict condition: the transferee (unlisted) company must remain unlisted unless and until it becomes listed, and shareholders of the transferor (listed) company must be given an exit option.
This meant that even though PEL (listed) was merging into PFL (unlisted), PFL could not automatically become listed as a result of the merger. It had to remain unlisted until it independently met the listing requirements and received stock-exchange and SEBI permissions.
The Piramal Group resolved this sequencing challenge with precision.
- On 23 September 2025, trading in PEL’s shares was suspended in accordance with stock-exchange guidelines and after NCLT approval.
- PEL shareholders were then allotted PFL shares in a 1:1 ratio as provided in the sanctioned scheme.
- At this stage, PFL, though the surviving company, remained unlisted, complying fully with Section 232(3)(h).
After completing all statutory formalities and all regulatory clearances were secured, PFL was directly listed on 7 November 2025.
Implications and Emerging Practice
The merger’s design sets a precedent for other large NBFCs that fall within the RBI’s upper-layer framework. Entities such as Aditya Birla Finance have already announced similar consolidations to comply with the same deadline. For conglomerates with multiple regulated subsidiaries, this method offers certainty, speed and cost efficiency.
From a regulatory standpoint, the result aligns perfectly with the policy intent: large financial institutions are brought under market scrutiny and disclosure norms without congesting the IPO pipeline. For investors, it provides direct ownership in the operating company with no dilution of rights or transparency.
Conclusion: A Shift in India’s Listing Architecture
The Piramal merger marks an evolution in India’s approach to listings. It demonstrates that a company can become listed not only by raising public funds but also through statutory consolidation when public shareholders already exist. As more large NBFCs restructure under RBI’s framework, “listing by arrangement” is set to become an accepted route. The one that balances corporate necessity with investor protection and regulatory oversight. The merger thus stands as an example of how India’s corporate-law architecture can adapt to regulatory imperatives while maintaining transparency and legal integrity.
This article is published on the TaxGuru; the link is shared below.
https://taxguru.in/corporate-law/listing-ipo-piramal-finance-piramal-enterprises-merger.html