Piramal Enterp. — Q4 FY25 earnings call

Call held 6 May 2025

Management summary

Piramal Enterprises has successfully completed its three-year transformation journey, pivoting from a wholesale-heavy lender to a retail-focused financial services firm. The company achieved all its FY25 objectives, including aggressive legacy book rundown and robust growth in retail and 'Wholesale 2.0' segments. With a clean balance sheet and a significant tax shield of ₹14,500 crores, management is now focused on scaling the AUM to over ₹1 lakh crore in FY26 with improved profitability.

Highlights

  • Consolidated Net Profit for FY25 stood at ₹485 crores, a significant turnaround from a loss of ₹1,684 crores in FY24.

  • Total AUM grew 17% YoY to ₹80,689 crores, driven by a 36% YoY growth in the 'Growth AUM' segment.

  • Legacy AUM was reduced by 53% YoY to ₹6,920 crores, now representing only 9% of the total balance sheet.

  • Retail : Wholesale mix improved to 80:20, exceeding the initial target of 75:25 set for the year.

  • Growth business opex-to-AUM improved to 4.0% in Q4 FY25 from 4.9% in Q4 FY24.

  • Management guided for a FY26 consolidated PAT of ₹1,300–1,500 crores and AUM exceeding ₹1,00,000 crores.

  • Board announced a dividend of ₹11 per share, representing a 50% payout ratio.

Key financials

  1. Consolidated Net Profit ₹102 Cr +161.5%QoQ
  2. Total AUM ₹80,689 Cr +17%YoY
  3. GNPA 2.8%
  4. NNPA 1.9%
  5. Capital Adequacy Ratio 23.6%
  6. Net Worth ₹27,096 Cr 0%YoY

What they filed

Q1 FY26: revenue up 18.7%, net profit up 52.5% against the same quarter last year.

₹ Cr · quarterly
Line itemQ2 FY24Q3 FY24Q4 FY24Q1 FY25Q2 FY25Q3 FY25Q4 FY25Q1 FY26
Revenue2,193 2,476 2,473 2,227 2,288 +4%2,825 +14%2,854 +15%2,643 +19%
Net profit48 -2,378 137 181 163 +240%39 +102%102 −26%276 +52%
How to read this

₹ crore, as filed. The percentage beside a figure is the change against the same quarter a year earlier — never the quarter before, which would make every seasonal business look like it collapses and booms each year.

Segment breakdown

Share of AUM
₹80,689 Cr Total
  • Retail Lending ₹64,652 Cr 80.1%
  • Wholesale 2.0 ₹9,117 Cr 11.3%
  • Legacy AUM ₹6,920 Cr 8.6%

Guidance & targets

Profitability

  • Consolidated PAT Profitability · FY26 · High confidence ₹1,300–1,500 crores

    From ₹485 crores today

    we have guided to a profit of Rs. 1,300-1,500 crores in the coming year. This is on a consol. basis... there are a lot of moving pieces in the P&L here and that is why we wanted to offer a sense of stability in terms of a central anchor.

    — Jairam Sridharan, CEO (Retail Lending)

Volume

  • Total AUM Volume · FY26 · High confidence > ₹1,00,000 crores

    From ₹80,689 crores today

    In FY26 we expect to deliver an AUM growth of about 25% year-on-year taking our total AUM to more than Rs. 1,00,000 crores.

    — Ajay Piramal, Chairman

Other

  • Legacy AUM Reduction Other · FY26 · High confidence ₹3,000–3,500 crores

    From ₹6,920 crores today

    The legacy AUM should further decline to Rs. 3,000 to 3,500 crores in FY26 and be negligible in the context of our overall Balance Sheet size.

    — Ajay Piramal, Chairman

  • Deferred Consideration (Piramal Imaging) Other · FY26 · Medium confidence USD 140 million
    We also expect to receive deferred consideration of about USD140 million in FY26 for the sale of the Piramal Imaging business in 2018.

    — Ajay Piramal, Chairman

Margin

  • Retail Opex-to-AUM Margin · Medium-term · Medium confidence 3.5% to 4.0%

    From 4.3% today

    We aim to continue this trend, in line with our medium-term guidance of 3.5% to 4.0%.

    — Jairam Sridharan, CEO (Retail Lending)

Risks & concerns

  • Microfinance Asset Quality

    medium

    Microfinance (within Business Loans) saw sharp deterioration with 90+ DPD at 6.9%, though it is now only 1.5% of retail AUM.

    Management acknowledged

  • Legacy Book Haircuts

    medium

    Historical haircuts on legacy book reduction have been 25-30%; further reductions to ₹3,000cr may involve similar hits.

    Both acknowledged

  • Competitive Pressure in Housing Loans

    low

    Management noted that ticket sizes <₹25 lakh are challenging, but they are maintaining yields at 11.5% rather than chasing growth at lower rates.

    Analyst downplayed

Areas of evasion (1)

  • Specific components/split of the ₹1,300-1,500cr PAT guidance between core and one-offs.

Q&A highlights

3 direct
Components of FY26 Profit Guidance Direct
The gains from the Piramal Imaging transaction that you mentioned is one of them. There are kind of potential haircuts from some of the reduction of the Legacy book. There are a lot of these one-offs all of which is included in that Rs. 1,300 crores too.

Clarifies that the ambitious profit target for next year includes significant one-time gains and recoveries, not just core operating profit.

Asked by Shreya Shivani, CLSA

Associate Income Errata Direct
On the Associate income in Page #46 in the Investor presentation, it shows Q4 profit from Pramerica Life as Rs. 82 crores and from alternatives as Rs. 8 crores. Those numbers are swapped.

Management proactively corrected a data error in the presentation, showing high transparency regarding segment profitability.

Asked by Kunal Shah, Citigroup

Leverage and Capital Returns Direct
Buybacks are largely not feasible for financial services companies because our debt equity is greater than 2 and SEBI norms don't allow it... we are using to the fullest the one option that we have, which is dividend by paying 50% payout ratio.

Explains the regulatory constraints on buybacks and confirms the company's commitment to returning capital via dividends despite being 'overcapitalized'.

Asked by Sarvesh Gupta, Maximal Capital

2 min read 5 chapters

Detailed narrative

Completion of a Three-Year Transformation

Piramal Enterprises has successfully transitioned from a wholesale-led model to a retail-dominated financial services company. Over the last three years, Growth AUM (Retail + Wholesale 2.0) has grown at a 50% CAGR, increasing its share from 34% to 91% of total AUM. Simultaneously, the legacy wholesale book was aggressively liquidated from ₹43,174 crores to just ₹6,920 crores, a reduction management describes as 'unprecedented in the industry'.

Retail Lending: Scaling with Efficiency

The retail business reached an AUM of ₹64,652 crores, growing 35% YoY. Mortgages remain the flagship product, accounting for 68% of retail AUM with a stable 90+ DPD of 0.5%. Management highlighted significant improvements in operating leverage, with the retail opex-to-AUM ratio dropping from 6.5% to 4.3% over eight quarters, driven by investments in technology and AI.

Wholesale 2.0: Granular and Delinquency-Free

The new wholesale lending strategy, 'Wholesale 2.0', has reached an AUM of ₹9,117 crores with zero delinquencies since its inception 2.5 years ago. The book is characterized by granularity, with an average ticket size of ₹70 crores and an effective interest rate of 14.4%. Despite high prepayment rates (45% of disbursements) due to strong project performance, the segment grew 44% YoY.

FY26 Profitability and Tax Shield

Management is targeting a consolidated PAT of ₹1,300–1,500 crores for FY26, a significant jump from FY25's ₹485 crores. This growth will be supported by a ₹14,500 crore tax shield from assessed carry-forward losses following the merger of PEL and Piramal Finance, effectively making PBT equal to PAT for several years. Additional one-time gains are expected from Piramal Imaging and AIF recoveries.

Capital Allocation and Shareholder Returns

With a net worth of ₹27,096 crores and a capital adequacy ratio of 23.6%, PEL remains 'overcapitalized'. Due to regulatory constraints on buybacks (debt-to-equity > 2), the company has opted for a high dividend payout ratio of 50% (₹11 per share). Management intends to gradually increase leverage from the current 2.4x toward a self-imposed cap of 4x to improve ROE.

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