Target: ₹1,320

CMP: ₹964.65

Piramal Enterprises had fixed September 1 as the record date for the demerger of Piramal Pharma (PPL). Price discovery for the Financial Services business has already occurred, and PIEL now trades as a diversified NBFC registered with the RBI.

Integration of DHFL has progressed well. The retail lending business continues to gain traction, with an improvement in the disbursement run-rate. Multiple partnerships with Fintechs and Consumer-Techs have aided the momentum in the Embedded finance product segment.

Asset quality (with slippages in the wholesale book) has deteriorated over the last two quarters, with PIEL making provisions in corresponding accounts. The company currently carries ECL provisions of 6.2 per cent of its total AUM and about 8.5 per cent (MOFSL estimates) on its Wholesale AUM. PIEL will utilise any recoveries from the POCI book, or any one-off gain from the contingent liabilities (about ₹3,300 crore), to make requisite provisions on the stressed portion of its Wholesale loan book in FY23.

We expect its Wholesale loan book to continue to moderate as the company looks to aggressively create provisions on stressed exposures, and then monetise them.

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