Piramal Enterprises plunges 9% as brokerages downgrade stock after Q1 results

CLSA has downgraded Piramal Enterprises to "Underperform" with a reduced target price of Rs 860 per share.

Piramal Enterprises stock fell up to 9 percent after the diversified non-banking financial company (NBFC) reported its fiscal first quarter earnings. Net profit of the Piramal Group firm plunged 64 percent year-on-year to Rs 181 crore in Q1FY25 due to a high base effect from a one-off item in the previous year.

The company's core net interest income (NII) increased by 18 percent YoY to Rs 807 crore, supported by a 10 percent rise in total assets under management (AUM) to Rs 70,576 crore. However, the net interest margin narrowed to 6.7 percent from 7.3 percent in the same period last year.

The company indicated that disbursements were affected in the June quarter due to regulatory changes concerning fair practices but expressed confidence in achieving its FY25 target of 15 percent AUM growth, aiming for Rs 80,000 crore.

CLSA has downgraded Piramal Enterprises to "Underperform" with a reduced target price of Rs 860 per share. The downgrade follows a period of negative credit costs, primarily due to lower provisions for Stage 1 and Stage 3 assets, and one-off gains that offset otherwise weak operating profit.

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Although the company achieved a 10 percent YoY growth in AUM, driven by a 43 percent increase in its retail book, some segments of this retail book are experiencing a worsening 90+ days past due (DPD) trend, CLSA noted.

The international brokerage believes this deterioration could pressure both growth and credit costs. Additionally, management has indicated that there may be near-term pressures on the company's cost of funds.

Jefferies maintained an 'Underperform' rating with a target price of Rs 805. The company's June quarter net profit did not meet the brokerage estimates. It said that Piramal Enterprises utilised Rs 2.6 lakh crore of overlay provisions in Q1, which helped boost profit.

While retail loans are growing well, the legacy wholesale AUM is expected to shrink further, leading Jefferies to anticipate a slow recovery in earnings.

At 10:48 am, Piramal Enterprises shares were trading 9 percent lower at Rs 892.6 apiece on the National Stock Exchange (NSE). In the last one year, the stock has tumbled 13 percent. In comparison, benchmark Nifty's rose 25 percent during this period.

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