Buy Piramal Enterprises; target of Rs 1320: Motilal Oswal

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26 Aug, 2025 12:21

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Motilal Oswal's research report on Piramal Enterprises

PIEL had fixed 1st Sep’22 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% of its total AUM and ~8.5% (MOFSLe) on its Wholesale AUM, with a PCR of 38%/~54% on S2/S3 loans. PIEL will utilize any recoveries from the POCI book, or any one-off gain from the contingent liabilities (~INR33b), 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 monetize them. Within Retail, we expect a disbursement/AUM CAGR of ~90%/~30% over FY22-25E. Consolidation in the Wholesale book and strong growth in the Retail book will result in the proportion of Retail loans increasing to ~55% of the loan mix by FY25E.

Outlook

We estimate a PAT CAGR of 37% over FY22-25, resulting in a FY25 RoA/RoE of 2.2%/~10%. Using the SoTP method (FY24E based), we value the Lending business at 1x BVPS, Shriram group investments at our TP for its subsidiaries, and Life Insurance and alternatives at 0.5x trailing EV and BV, respectively. PIEL has an excess net worth of ~INR48b, which we have valued at 1x. We maintain our Buy rating with a revised TP of INR1,320.

More Info

At 16:01 hrs Piramal Enterprises was quoting at Rs 964.65, down Rs 23.05, or 2.33 percent.

It has touched an intraday high of Rs 1,004.50 and an intraday low of Rs 958.20.

It was trading with volumes of 127,119 shares, compared to its thirty day average of 82,760 shares, an increase of 53.60 percent.

In the previous trading session, the share closed down 0.25 percent or Rs 2.50 at Rs 987.70.

The share touched its 52-week high Rs 3,013.00 and 52-week low Rs 980.50 on 07 October, 2021 and 15 September, 2022, respectively.

Currently, it is trading 67.98 percent below its 52-week high and 1.62 percent above its 52-week low.

Market capitalisation stands at Rs 23,022.69 crore.

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Piramal Enterprises - 160922 - moti