Shares of Piramal Enterprise declined by approximately 4 percent during afternoon trading on August 28.
As of 2:18 pm, the stock was trading at Rs 1,056 on the National Stock Exchange, down 4.58 percent.
On August 28, Piramal Enterprises (PIEL) held its Investor Day, during which the top management reaffirmed their earlier-stated ambition to double the FY23 loan AUM by FY28, reaching Rs 1.2-1.3 trillion, and achieving a consolidated RoA of around 3 percent.
Key Highlights:
i) Following the business transformation necessitated by a weak real estate cycle in 2018, Piramal has been dedicated to establishing a retail NBFC of considerable scale.
ii) The company has undergone an overhaul of its management, business teams, and Board. The leadership team consists of professionals with over 20 years of experience from esteemed institutions such as AXIS, ICICI, Bajaj Finance, Amazon, Avendus, and KKR.
iii) A robust technology platform has been developed by the company, running on cloud infrastructure without reliance on legacy servers. The company aims for an overall RoA of 3–3.3 percent by FY28E, with a core retail RoA of 2.5–3 percent. The retail-to-wholesale mix is projected to improve from 56:44 to 70:30. Excess capital will be allocated towards acquisitions.
iv) While Wholesale 1.0 will continue to be phased out, the company's focus will shift toward developing a diversified and detailed Wholesale 2.0 portfolio. The management team has repeatedly emphasised the significance of M&A in PIEL's strategic plans, given its strong track record in acquisitions.
Brokerage Views:
Jefferies - Underweight Rating
The firm has assigned an underperforming rating, setting a target of Rs 920 per share. This is based on the expectation of low interest-earning assets and higher operating expenses, which may limit RoA to below 1.5 percent over FY23-26. "With a risk-reward ratio of 0.85 times FY24 BV, the investment outlook appears unattractive," stated Jefferies.
Emkay Global has issued a Buy rating for PIEL's scrip, with a target price of Rs 1,230. The brokerage firm believes that the company is on the right trajectory to achieve profitable growth and is well-positioned to deploy capital for organic or inorganic growth, as well as for distribution to shareholders.
According to Emkay Global, "The commentary from the Investor Day has provided reassurance about the company's progress, with tangible milestones clearly outlined. Clarity regarding core activities, peripheral activities, unlocking value from financial investments, and optimizing capital utilization has provided significant comfort. Overall, PIEL seems to be making steady advancements toward its medium-term goal of achieving a 3 percent RoA. Its performance should be evaluated within the medium-term outlook and beyond the near term."
Motilal Oswal - Buy Rating
The firm maintains a Buy rating with a revised target price of Rs 1,280. "Over the past two years, PIEL has fortified its balance sheet by reducing its Wholesale loan book, making it more granular with no exposure exceeding 5 percent of net worth. Additionally, it has improved its borrowing structure, leading to lower borrowing costs, and has enhanced its preparedness for contingencies with ECL provisions amounting to 4.4 percent of total AUM."
Motilal Oswal brokerage firm anticipates a 45 percent CAGR in retail AUM and an approximately 18 percent CAGR in total asset under management (AUM) over FY23-25, taking into account the upcoming consolidation in the Wholesale book over the next few quarters.
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