Piramal Enterprises posted a net loss of ₹2,378 crore for Q3 FY24 owing to provisions of ₹3,540 crore made against the NBFC’s AIF investments. This also led to a reduction in the AUM as these investments were written off from the portfolio and hit the capital of the company by 400 bps.

The company said it has AIF exposure in two schemes relating to its legacy business, wherein Piramal is a limited partner (LP) in these schemes. Exposure under the first scheme is ₹3,142 crore, of which ₹1,746-crore overlap with its loans as per RBI’s November 19 circular. Exposure under the second scheme is ₹398 crore, which has no overlap.

Piramal provided entirely for both the exposures during the quarter, it said, adding that it has so far received ₹1,137 crore as repayment of interest and principal on these units.

Excluding the impact of these provisions, PAT for Q3 FY24 would have been ₹290 crore and CRAR would have been 28.4 per cent instead of the reported figure of 24.3 per cent as of December 2023. Consolidated AUM would have been higher by 9 per cent on year and 6 per cent on quarter.

“The P&L provisions have nothing to do with the underlying recovery plans for these assets. These assets form part of the ‘1.0 book’ and the plan was to always systematically go on with recovery of cash flows and loans,” the management said in the earnings call, adding that the investments are well collateralised and the company expects to see full recovery of the AIF investments.

The decision to provide for the entire exposure was taken because the company is “super conscious of the fact that the regulator is not keen on banks and NBFCs investing in AIFs where there is any possibility that the investment might in turn have exposure to any of our underlying loans”.

Operating metrics§

Disbursements for the quarter grew 50 per cent year on year to ₹7,692 crore, led by 48 per cent growth in mortgage disbursements to ₹3,920 crore. The company added three lakh new customers during the quarter taking the total customer base to 39 lakh.

The new wholesale or ‘growth’ business grew 24 per cent on quarter to ₹5,562 crore. The legacy business, referred to as the ‘Wholesale 1.0’ book fell 47 per cent year on year to ₹18,693 crore. The share of the new business improved to 72 per cent (34 per cent), whereas that of the legacy business reduced to 28 per cent (66 per cent).

During the quarter, the company announced the sale of ₹1,440 crore from Shriram investments, which has a carrying value of ₹569 crore. The company expects to close this sale in Q4 FY24, proceeds from which are seen helping further strengthen the balance sheet.

Consolidated gross NPA ratio fell 33 bps on quarter to 2.4 per cent, whereas net NPA ratio improved 37 bps to 1.1 per cent.

“Our commitment is to further enhance profitability by optimising operating leverage in our growth business and reducing the contribution of the legacy business. The trajectory forward involves steadily scaling up our growth business, strategically winding down legacy wholesale assets, and divesting non-core assets,” Chairman Ajay Piramal said.

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