Target: ₹1,115

CMP: ₹807.40

Piramal Enterprises (PIEL) Q3-FY23 performance as a NBFC remained volatile for the second consecutive quarter. PIEL reported PAT of ₹3,550 crore (significantly higher than our estimate of ₹500 crore) on account of: reversal of income tax provision of ₹3,300 crore related to DHFL acquisition; fair value gain of about ₹1,000 crore because of restructuring of Shriram Capital group; and ₹130 crore of bond buyback gains. On core performance front, NII grew by 22 per cent sequentially on higher NIM (6.5 per cent in Q3-FY23 v/s 4.6 per cent in Q2-FY23).

Continued with aggressive provisioning approach, PIEL created one-time provisioning buffer of ₹1,070 crore on Stage I and Stage 2 of wholesale AUM.

Retail disbursements remained strong at ₹5,110 crore (higher than our estimate of ₹4,500 crore) which was also well ahead of set target of ₹2,500-3,500 crore of disbursements by Q3-FY23 (5-7x of pre-merger levels). Retail loan book grew 29.5 per cent y-o-y to ₹27,900 crore with the share at 43 per cent in the overall AUM. After many quarters of successive decline, AUM rose 1.7 per cent q-o-q to ₹64,900 crore.

Cost of borrowing (CoB) declined to 8.4 per cent in Q3-FY23 v/s 8.8 per cent in Q2-FY23. Opex remained high due to ongoing investments in retail lending business for future growth