Neutral Piramal Enterprises; target of Rs 1000: Motilal Oswal

Motilal Oswal's research report on Piramal Enterprises

PIEL is committed to reducing its legacy AUM from ~INR130b as of Jun’24 to ~INR60-70b by Mar’25 and expects (not guidance) that a ~25% haircut could be required to run down the residual stressed legacy book. As in the past, the rundown will not impair the company’s net worth thanks to pockets of value in Shriram Life/General investments, AIF recoveries and tax-related gains. Unsecured digital loans are still a difficult but unavoidable channel (necessary evil) for lenders primarily focused on customer acquisition. The behavior and credit requirements of customers acquired digitally are different from those of customers acquired through physical channels. Retail (at industry level) has been benign for the last two years, and growth/asset quality metrics could deteriorate by FY25 end. PIEL is making efforts to further strengthen its retail franchise; however, the reduction in opex ratios and improvements in the RoA profile will be only linear and gradual (no quick fixes).

Outlook

We do not see catalysts for any meaningful improvement in the core earnings trajectory of the company. We expect PIEL to deliver ~1.7% RoA and ~6% RoE in FY26. We value the lending business at 0.6x FY26E P/BV (unchanged). Retain Neutral with a revised TP of INR1,000 (premised on Mar’26 SOTP).

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