In Q4FY24, Piramal Enterprises reported a remarkable revival in its fortunes going from a loss of ₹195.87 crores in the previous corresponding quarter (Q4FY23) to a profit of ₹137.09 crores, which is good news for the company.
Total assets under management climbed 8% year-on-year, reaching ₹47,927 crore, fueled by a strong 49% growth in retail AUM. The consistent growth in AUM is a particularly positive sign, suggesting improving performance.
Curious about the company’s performance in the fourth quarter of FY24? Join me as we dive into the details!
About Piramal Enterprises
Piramal Enterprises Ltd (PEL) is a non-banking financial company (NBFC). They hold registration with the Reserve Bank of India (RBI) and operate in various domains, including retail and wholesale lending, as well as fund-based services.
PEL has ventured into the financial sector via Piramal Capital & Housing Finance Ltd., a housing finance entity recognised by the RBI, engaging in a spectrum of financial service offerings.
PEL focuses on retail lending, especially for the underserved population. Through a network of its branches numbering 487, it serves more than 1.3 million customers across 26 states as of March 31, 2024.
PEL provides used car financing, home loans, small business loans, property loans, etc. Their target market includes budget-friendly buyers in cities from Tier I-III, along with those on the outskirts of major metros.
Besides retail lending, PEL also provides financing to real estate developers and some corporations.
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Quarterly performance
Piramal Enterprises Q4 results
The company reported a net profit of ₹137 crore, a significant improvement from the previous year’s loss of ₹196 crore. This turnaround was largely due to a tax benefit of ₹1,203 crore, which included the deferred tax asset from a ₹10,627 crore loss carried forward following the acquisition of the bankrupt DHFL two years prior.
However, on an annual basis, the company faced a loss of ₹1,684 crore, a stark contrast to the previous year’s profit of ₹9,969 crore. This was attributed to the fiscal year’s provisions for alternative investment funds.
The company’s total assets under management (AUM) saw an 8% increase year-over-year, driven by a 49% surge in retail AUM, reaching ₹47,927 crore. The quarterly disbursements also rose by 30%, amounting to ₹8,910 crore.
Meanwhile, Piramal has been actively reducing its legacy wholesale AUM, which saw a 50% reduction to ₹14,572 crores compared to the previous year. This reduction adversely affected the net interest income, which declined by 18% year-over-year to ₹755 crore. Additionally, Piramal’s cost of borrowing rose slightly to 6.50%, up from 6.20% a year earlier.
QoQ performance
| Consolidated Income Statement (in ₹ crores) | Q4 FY24 | Q3 FY24 | QoQ % |
| Interest Income | 1,944 | 1,953 | 0% |
| Less: Interest Expense | 1,189 | 1,118 | 6% |
| Net Interest Income | 755 | 835 | (10%) |
| Total Income | 1,078 | 1,086 | (1%) |
| Profit Before Tax | (2,191) | 132 | – |
| Reported Net Profit | 137 | (2,378) | – |
YoY performance
| Consolidated Income Statement (in ₹ crores) | FY24 | FY23 | QoQ % |
| Interest Income | 7,423 | 7,799 | (5%) |
| Less: Interest Expense | 4,400 | 4,041 | 9% |
| Net Interest Income | 3,022 | 3,757 | (20%) |
| Total Income | 3,971 | 5,046 | (21%) |
| Profit Before Tax | (1,346) | (2,464) | |
| Reported Net Profit | (1,684) | 9,969 |
Piramal Enterprises’ competitors
Here are some of the market competitors of Piramal Enterprises:
| Name | P/E | ROE % | D/E | ROCE % |
| Piramal Enterprises | 45.09 | 1.40 | 2.02 | 3.92 |
| Bajaj Finance | 28.51 | 22.05 | 3.82 | 11.87 |
| Shriram Finance | 11.61 | 15.93 | 3.99 | 11.23 |
| Jio Financial Services | 133.72 | 1.27 | 0.00 | 1.55 |
Stock price
Piramal Enterprises’ share price has not seen exceptional performance in the past.
Examining the Piramal Enterprises share price history, it’s observed that there has been a decline of 61% over the previous five years. However, the past year has seen a positive shift, with a 10% increase in returns as of May 13, 2024.
Overall, analyst’s opinions are mixed when we talk about Piramal Enterprises’ share price target.
- Motilal Oswal turned less bullish on the stock. They lowered their target price to ₹925 per share from ₹1,100 and downgraded their rating to ‘neutral’ from ‘buy’.
- Citi Research also joined the downgrade, reducing their target price to ₹720 per share from ₹850 and maintaining their ‘sell’ recommendation.
- Emkay Global, however, remained optimistic. They kept their ‘add’ rating and price target of ₹1,000.
Based on seven analysts, two analysts recommend buying the stock, two suggest holding, and three advise selling. The average target price for the next 12 months indicates a potential upside of 4.4%.
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Strengths and weaknesses
Strengths
- The Board has approved a joint arrangement stipulation leading to the merger of Piramal Enterprises Limited (PEL) with its wholly-owned subsidiary, Piramal Capital & Housing Finance Limited (PCHFL).
The restructure will result in a more efficient treasury function and wider geographical coverage by the lending businesses in the capital markets. Moreover, it entails increased revenue potential through an expanded range of financial services for an enlarged base of clients.
- Over the past two to three years, Piramal Enterprises has undergone a profound transformation that involved changing its operational framework and strategic focus. This shift was particularly pronounced in fiscal 2024. During this period, there was remarkable growth in emerging sectors like retail lending and revamped wholesale segment.
Weaknesses
- Piramal Enterprises, as an NBFC, is subject to the Reserve Bank of India’s regulations. They range from terms of lending money by Piramal to the amount of capital they should hold. More stringent regulations might restrict Piramal and hamper its growth and profits.
- The Indian NBFC sector has become more competitive. This requires that Piramal Enterprises work on strategies to attract and maintain clients. Competitiveness can hinder its growth and affect its net income.
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Bottomline
Piramal Enterprises has demonstrated a commendable turnaround in Q4FY24, swinging from a loss to a profit, backed by robust growth in retail AUM. However, this turnaround was largely due to a tax benefit.
So, it will be essential for investors to watch whether the company will be able to maintain its profitability and AUM growth. Remember, the financial market is dynamic, and while Piramal’s current trajectory is promising, it’s crucial to keep abreast of market trends and regulatory changes that may affect future performance.
