Piramal Enterprises

DTA reversal to benefit return ratios

Financials | Flash Note | February 29, 2024

ADD (NO CHANGE) PEL has received an income tax assessment order from the authorities that allows an
amount of Rs 106.35 bn to be claimed as loss (arising by way of bad advances given by
Current Price (Rs) : 899 eDHFL – carry-forward losses of Dewan Housing) after suo-moto withdrawal of claims to
Target Price (Rs) : 1,000 (no chg) the tune of Rs 36.98 bn, against which there will be some penalty payable (uncertain on the
Potential Upside : 11% quantum, management most likely will contest it). Consequent to this order, we believe
that PEL will be a zero-tax-paying entity over the next few years, which will be RoE-
accretive. We have still not factored this in and will seek more clarity on the accounting
Market Data
timelines/process of the same. Retain ADD with a TP of Rs 1,000.
No. of shares : 224 mn
Free Float : 53.8% RoE could improve 140/190 bps in FY25/26E
Market Cap (USD) : 2,423 mn An initial sensitivity assuming zero tax till FY26E indicates that RoE could improve
52-week High/ Low (Rs) : 1,140/ 630 140/190 bps in FY25/26E, though will remain in the single-digits (7.8/9.5%). In Q4 FY23,
Avg. Daily Volume (6M) : 1.41 mn management had indicated that there were potential unrecognized deferred tax assets of
~Rs 41.20 bn to come through in subsequent quarters, of which ~65% has come through
Avg. Daily Value (6M;USD) : 16.57 mn
in this assessment order (assuming a tax rate of 25% on Rs 106.35 bn).
Bloomberg Code : PIEL IB
Promoters Holding : 46.2% Gradually monetizing non-core investments
FII / DII : 17% / 12% The company has indicated that it will sell its entire 20% stake in Shriram Investment
Holdings Pvt. to Shriram Ownership Trust for Rs 14.40 bn. This is likely to be completed in
Price Performance Q4 YF24 and will further strengthen the balance sheet. It will continue to have
(%) 1M 3M 12M investments in Shriram Life and Shriram General. As of Dec’23, its CAR was ~24%.
Absolute (0.7) 2.4 2.4
Retail business continues to show strong momentum
Relative (4.1) (8.4) (20.9)
Retail disbursements in 9M FY24 at Rs 196 bn (up 70% YoY) are trending well. In this,
Source: Bloomberg
housing/MSME/used car grew 55/61/167% YoY. Retail AUM grew 54% YoY, with
mortgage AUM up 27% and contributing 72% of retail AUM. The share of retail is currently
at ~64% (vs 55% in Q1 FY24) and the company is on track to achieve ~70% retailization by
FY28E. Currently, ~36% of retail AUM is concentrated in Tier-2/3 cities, with secured-
unsecured-mix at 76:24; self-employed vs salaried stands at 61:39. Wholesale 1.0 is
running down sharply (-22% QoQ) and now forms ~8% of AUM.

AIF write-back to increase volatility

PEL has created provision of ~Rs 35.4 bn for AIF investments to meet the regulatory
requirements. Management is confident of a full recovery, but these one-offs will keep
impacting profitability. Overall asset quality is improving, with GS3/NS3 in Q3 at 2.4/1.1%
(vs 2.7/1.5% in Q2).

Financial summary (Standalone)

Y/E March FY22 FY23 FY24E FY25E FY26E
Net Income (Rs mn) 36,858 50,924 70,466 63,292 72,676
PAT (Rs mn) 16,622 99,686 (7,351) 18,233 22,571
EPS (Rs) 51.2 63.4 78.2 70.0 89.3
EPS chg (%) - 23.9 23.3 (10.4) 27.6
Previous EPS (Rs) - - (32.7) 81.2 100.5
Adj BV (Rs) 1,457.8 1,271.0 1,210.3 1,255.9 1,312.9
Praveen Agarwal PE (x) 13 2 (27) 11 9
praveen.agarwal@axiscap.in P/BV (x) 0.6 0.7 0.7 0.7 0.7
Amit Jain RoE (%) - 5.7 (2.5) 6.4 7.6
amit1.jain@axiscap.in RoA (%) 2.5 2.1 (0.9) 2.0 2.2
Shailesh Prasad Net NPA (%) 1.3 1.5 1.4 1.3 1.3
shailesh.prasad@axiscap.in Source: Company, Axis Capital

FOR IMPORTANT DISCLOSURES AND DISCLAIMERS, REFER TO THE END OF THIS MATERIAL 1
 Piramal Enterprises
Flash Note

Exhibit 1: Loan book stood at Rs 678.2 bn as of Q3… Exhibit 2: …with share of retail at 64%

Loan Book Growth (YoY) - RHS Wholesale book Retail book

800 60 100%
11 12 12 11 11 11 11 11 11
700
33 36 36 37
600 40 80% 43 43

678.2
669.3
50 55

648.7
639.9
639.4
637.8
58 64
622.2

500
566.1

60%
530.6

515.2
514.3

512.7
509.6

651.9
(Rs bn)

645.9

400 20

(%)
463.7
446.7

606.4
427.5

89 88 88 89 89 89 89 89 89
300 40%
67 64 64 63
57 57
200 0 50 45
20% 42 36
100
0 (20) 0%
Q3FY20

Q2FY23
Q1FY20
Q2FY20
Q4FY20
Q1FY21
Q2FY21
Q3FY21
Q4FY21
Q1FY22
Q2FY22
Q3FY22
Q4FY22
Q1FY23
Q3FY23
Q4FY23
Q1FY24
Q2FY24
Q3FY24

Q1FY20
Q2FY20
Q3FY20
Q4FY20
Q1FY21
Q2FY21
Q3FY21
Q4FY21
Q1FY22
Q2FY22
Q3FY22
Q4FY22
Q1FY23
Q2FY23
Q3FY23
Q4FY23
Q1FY24
Q2FY24
Q3FY24
Source: Company, Axis Capital Source: Company, Axis Capital

Exhibit 3: Retail loan book stood at Rs 430 bn Exhibit 4: Retail loan book by product category
Retail book Growth (YoY) - RHS Other
500 60 secured
430 4%
Unsecured
386 50
400 349 24%
321
279 40
300 249
(Rs bn)

30
(%)

LAP
200 23%
20
100 Housing
10 49%
0 0
Q3FY24
Q2FY23

Q3FY23

Q4FY23

Q1FY24

Q2FY24

Source: Company, Axis Capital Source: Company, Axis Capital

Exhibit 5: Retail disbursements growing

Rs mn Q4FY22 Q1FY23 Q2FY23 Q3FY23 Q4FY23 Q1FY24 Q2FY24 Q3FY24 YoY QoQ
Housing 5,900 8,370 14,900 18,750 24,120 19,080 23,130 23,130 23 0.0
MSME Secured 4,430 5,750 8,060 7,800 9,660 8,510 10,240 16,070 106 56.9
Unsecured 3,930 9,750 15,140 22,150 31,180 26,660 25,200 31,660 43 25.6
Other secured 540 730 1,640 2,420 3,320 2,810 3,910 6,060 150 55.0
Total 14,800 24,590 39,730 51,110 68,280 57,070 62,460 76,920 50 23.2
Wholesale 1.0 431.75 416.55 380.79 351.01 290.53 260.02 238.27 186.93 -47 -21.5
Wholesale 2.0 4.58 6.69 8.29 18.7 27.92 30.45 45.01 55.62 197 23.6
Source: Company, Axis Capital

February 29, 2024 2

 Piramal Enterprises
Flash Note

Financial summary (Standalone)

Profit & Loss (Rs mn) Key Ratios
Y/E March FY22 FY23 FY24E FY25E FY26E Y/E March FY22 FY23 FY24E FY25E FY26E
Interest earned 75,228 77,986 74,895 88,884 1,02,300 PER SHARE DATA
Interest expended (42,251) (39,943) (43,459) (48,258) (55,125) FDEPS (Rs.) 69.7 417.7 (32.7) 81.2 100.5
Net interest income 32,977 38,043 31,435 40,626 47,175 BV (Rs.) 1,487.1 1,301.4 1,240.7 1,289.4 1,349.7
Non interest income 3,881 12,881 39,030 22,666 25,501 Adj. BV (Rs.) 1,457.8 1,271.0 1,210.3 1,255.9 1,312.9
Net income 36,858 50,924 70,466 63,292 72,676 DPS (Rs.) - 33.0 31.1 32.5 40.2
Operating expenses (13,622) (22,617) (30,575) (29,139) (31,097) Dividend payout (%) - 52.1 39.8 46.4 45.0
Staff expenses (5,126) (9,301) (13,765) (14,040) (14,742) YIELDS & MARGINS (%)
Other operating expenses (7,753) (12,088) (16,802) (15,122) (16,331) Yield on Funds 11.6 10.1 10.1 11.2 11.2
Operating profit 23,236 28,307 39,891 34,153 41,579 Cost of Funds 8.9 7.6 8.5 8.6 8.4
Provisions & contingencies (6,961) (52,951) (18,465) (14,487) (15,847) Net interest margin 5.1 4.9 4.3 5.1 5.2
Pre-tax profit 16,275 (24,643) 21,425 19,666 25,732 ASSET QUALITY (%)
Tax expense (4,062) 39,781 (3,857) (3,933) (5,661) Gross NPAs 3.4 3.2 2.8 2.7 2.5
Profit after tax 12,213 15,137 17,569 15,733 20,071 Net NPAs 1.3 1.5 1.4 1.3 1.3
Extraordinary item (1,529) 80,663 (27,320) - - Credit cost 1.1 7.4 2.7 1.9 1.8
Minority Provisioning coverage 55.2 49.5 50.0 50.0 50.0
5,939 3,886 2,400 2,500 2,500
interest/Associates
CAPITAL (%)
Adj. PAT 16,622 99,686 (7,351) 18,233 22,571
Tier-I 21.0 31.0 27.1 25.6 23.7

Balance Sheet (Rs mn) CAR 21 31 27 26 24

EFFICIENCY (%)
Y/E March FY22 FY23 FY24E FY25E FY26E
ROA 2.5 2.1 (0.9) 2.0 2.2
Total assets 9,83,399 8,37,522 8,58,821 9,46,434 10,67,288
ROE - 5.7 (2.5) 6.4 7.6
Cash & Balances with RBI 71,872 46,491 38,632 36,952 37,349
Cost to income 37.0 44.4 43.4 46.0 42.8
Investments - - - - -
CASA - - - - -
Advances 7,41,745 6,87,264 7,04,926 8,09,506 9,44,487
Effective tax rate 25.0 161.4 18.0 20.0 22.0
Fixed assets 1,03,215 32,690 28,540 24,033 18,561
GROWTH (%)
Other assets 66,568 71,076 86,723 75,943 66,891
Net interest income 11.4 15.4 (17.4) 29.2 16.1
Total liabilities 9,85,251 8,37,522 8,58,821 9,46,434 10,67,288
Fee income - - - - -
Equity capital 477 477 449 449 449
Operating expenses 1,035.2 66.0 35.2 (4.7) 6.7
Preference capital - - - - -
Profit after tax (14.9) 4.8 5.0 (8.7) 23.8
Reserves & surplus 3,54,414 3,10,114 2,78,273 2,89,213 3,02,755
Advances 51.7 (7.3) 2.6 14.8 16.7
Networth 3,54,891 3,10,591 2,78,723 2,89,662 3,03,205
Deposits - - - - -
Borrowings 5,54,510 4,95,828 5,22,233 6,06,255 6,99,839
Total assets 101.1 (14.8) 2.5 10.2 12.8
Deposits - - - - -
Other liabilities & prov. 75,850 31,103 57,865 50,516 64,244

Source: Company, Axis Capital

February 29, 2024 3

 Piramal Enterprises
Flash Note

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February 29, 2024 4

 Piramal Enterprises
Flash Note

Research Disclosure - NOTICE TO US INVESTORS:

This report was prepared, approved, published and distributed by Axis Capital Limited, a company located outside of the United States (a “non-US
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February 29, 2024 5

 Piramal Enterprises
Flash Note

Axis Capital Limited

SEBI Registration No: INH000002434
Axis House, C2, Wadia International Centre, P.B Marg, Worli, Mumbai 400 025, India.
Tel:- Board +91-22 4325 2525

Compliance Officer: Mr. Abhijit Talekar, Ph: +91-22-43255565, Email ID: compliance@axiscap.in
Grievance Redressal Cell Email ID: investor.grievance@axiscap.in

DEFINITION OF RATINGS
Ratings Expected absolute returns over 12 months
BUY More than 15%
ADD Between 5% to 15%
REDUCE Between 5% to -10 %
SELL More than -10%

Piramal Enterprises (PIRA.NS, PIEL IB) Price and Recommendation History

CMP Buy Add Hold Reduce Sell UR

3,500 (Rs)
3,000
2,500
2,000
1,500
1,000
500
0
Aug-21

Aug-22

Aug-23
Mar-21

Mar-22

Mar-23
Sep-21

Nov-21

Sep-22

Nov-22

Sep-23

Nov-23
Jan-22

Jan-23

Jul-23

Jan-24
Jul-21

Jul-22
May-21

May-22

May-23
Apr-21

Apr-22

Apr-23
Oct-21

Dec-21

Oct-22

Dec-22

Oct-23

Dec-23
Jun-21

Feb-22

Jun-22

Feb-23

Jun-23

Feb-24

Date Target Reco Date Target Reco Date Target Reco Date Target Reco
Price Price Price Price
30-Mar-21 2,300 Buy 05-May-23 930 Buy 12-Feb-24 1,000 Add
14-May-21 2,340 Buy 18-May-23 930 Buy
07-Aug-21 3,100 Buy 21-Jun-23 1,140 Buy
11-Nov-21 3,050 Add 07-Jul-23 1,140 Buy
11-Feb-22 2,925 Buy 25-Jul-23 1,140 Buy
26-May-22 2,560 Buy 29-Jul-23 1,250 Buy
31-Jul-22 2,500 Buy 10-Aug-23 1,250 Buy
29-Aug-22 2,500 Buy 28-Aug-23 1,250 Add
22-Sep-22 1,270 Buy 29-Nov-23 1,050 Add
09-Nov-22 1,100 Buy 30-Nov-23 1,050 Add
08-Feb-23 1,100 Buy 04-Jan-24 1,050 Add
06-Apr-23 950 Buy 30-Jan-24 1,000 Add
Source: Axis Capital

February 29, 2024 6