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    Piramal Enterp.

    PELGood
    Financial Services·27 Jan 2025
    Management Summary

    Piramal Enterprises delivered a quarter characterized by a continued structural shift toward its 'Growth' businesses (Retail and Wholesale 2.0), which now comprise 87% of the total AUM. While consolidated profit remains modest at ₹39 crores due to legacy book haircuts, these were largely offset by significant AIF recoveries. Management is aggressively running down the legacy book while tightening credit standards in unsecured retail segments like microfinance to navigate a hardening credit environment.

    Highlights

    8

    • Consolidated Net Profit reported at ₹39 crores for Q3 FY25.

    • Total AUM grew 16% YoY, exceeding the full-year guidance of 15%.

    • Retail AUM reached ₹59,093 crores, up 37% YoY, now accounting for 68% of total AUM.

    • Legacy AUM reduced by ₹1,713 crores QoQ to ₹10,353 crores (13% of total AUM).

    • Consolidated business NIM improved by 60 bps QoQ due to a shift toward growth businesses.

    • Asset quality remained stable with GNPA at 2.8% and NNPA at 1.5%.

    • Recovered ₹551 crores from the AIF book, resulting in a P&L gain of ₹376 crores.

    • Capital adequacy remains strong at 23.7% with cash and liquidity over ₹8,000 crores.

    Concerns

    1

    • Legacy Book Haircuts

    Key financials

    Single quarter

    06 metrics
    1. 01Consolidated Net Profit₹39 Cr
    2. 02Total AUM₹79,446 Cr+16%YoY
    3. 03GNPA2.8%
    4. 04NNPA1.5%
    5. 05Capital Adequacy Ratio23.7%

    Segment breakdown

    • Retail Lending₹59,093 Cr75.4%
    • Wholesale 2.0₹8,916 Cr11.4%
    • Legacy AUM₹10,353 Cr13.2%
    Donut· Share of AUM

    Guidance & targets

    5
    CategoryTargetPriority
    Other
    Legacy AUM as % of Total AUM
    < 10%
    		High
    Other
    Merger Completion Timeline
    September 2025
    		Medium
    Other
    Retail to Wholesale AUM Ratio
    75:25 to 80:20
    		Medium
    Margin
    Opex to AUM Ratio
    3.5% to 4%
    		Medium
    Profitability
    Steady State Credit Cost (Growth Business)
    ~2%
    		High

    Risks & concerns

    4
    RiskSeverity

    Microfinance Delinquency

    90+ DPD in microfinance spiked to 5.5% from near zero a year ago. — Management acknowledged

    medium

    Unsecured Business Loan Stress

    Management saw a 'big steep fall' in business loans and is slowing disbursements in this segment. — Both acknowledged

    medium

    Legacy Book Haircuts

    The legacy book rundown involves significant haircuts (30% this quarter), requiring one-time gains to offset impact on net worth. — Analyst acknowledged

    high

    Areas of Evasion(1)

    • Specific deal details for Shriram insurance stake exits were not provided beyond 'intent to exit'.

    Q&A highlights

    3

    “Actually, if you just look at the quarter, the haircut is close to 30%, right? So roughly 30% haircut on INR 1,700 crores reduction.”

    Clarifies the actual loss taken on legacy asset sales and how it is being funded by existing provisions and AIF gains.

    asked by Avinash Singh, Emkay Global

    2 min read5 chapters

    Detailed Narrative

    01

    Structural Pivot to Growth Businesses

    Piramal Enterprises has successfully shifted its portfolio mix, with 'Growth' businesses (Retail and Wholesale 2.0) now accounting for 87% of total AUM, up from just 34% in March 2022. Retail AUM grew 37% YoY to ₹59,093 crores, driven by mortgage products which now make up 68% of the retail book. Wholesale 2.0 AUM also saw robust growth of 60% YoY to ₹8,916 crores, maintaining 100% collection efficiency since inception.

    02

    Legacy Book Rundown and AIF Offsets

    The legacy discontinued book was reduced by ₹1,713 crores this quarter to ₹10,353 crores. Management took a ~30% haircut on these assets during the quarter, but the impact was mitigated by ₹551 crores in recoveries from the AIF book, yielding a ₹376 crore gain. The company remains on track to bring the legacy book below 10% of total AUM by the end of FY25, effectively cleaning up the balance sheet without impairing net worth.

    03

    Navigating Unsecured Lending Headwinds

    In response to a worsening asset quality environment in the broader sector, PEL has proactively slowed disbursements in unsecured products. Unsecured disbursements were down 12% YoY, while secured products grew 24%. Specifically, digital loans saw a 25% AUM decline YoY as the company 'put some brakes' on the segment a year ago. Microfinance has emerged as a stress point, with 90+ DPD rising to 5.5%, prompting a shift toward branch-based origination and salaried customers.

    04

    Operational Efficiency and Merger Progress

    The company is focusing on operating leverage, with the Opex-to-AUM ratio declining to 4.5% from 6.5% two years ago. Branch expansion has been moderated to 5-10 per quarter to focus on the productivity of the existing 514-branch network. On the corporate front, the merger of PEL into PCHFL is progressing, with name change applications filed and NCLT approval expected by September 2025, which will further simplify the corporate structure.

    05

    Liquidity and Capital Position

    PEL maintains a very strong capital position with a Capital Adequacy Ratio of 23.7% and a net worth of ₹26,924 crores. The company has cash and liquidity exceeding ₹8,000 crores. Management also highlighted a new 'pocket of value' with an estimated $140 million in deferred consideration from the sale of Piramal Imaging expected in FY26, providing further buffer for the legacy book rundown.

    This is an AI-generated summary of a publicly available earnings call transcript. It is for informational purposes only and does not constitute investment advice, a recommendation, or an endorsement. inve.money is not a SEBI-registered investment advisor. Please consult a qualified financial advisor before making any investment decisions.