- Net Profit: INR181 crores in Q1 FY25 vs. INR137 crores in Q1 FY24.
- Total AUM: Grew by 10% YoY to INR70,576 crores.
- Growth AUM: Increased by 51% YoY to INR57,601 crores.
- Retail AUM: Grew by 43% YoY to INR50,530 crores.
- Wholesale AUM 2.0: Up 132% YoY to INR7,071 crores.
- NII Growth: 34% YoY in Q1 FY25.
- NIM of Growth Business: 6.7% in Q1 FY25.
- OpEx to AUM: Declined by 104 basis points YoY to 4.6% in Q1 FY25.
- Operating Profit: Grew by 48% YoY to INR375 crores.
- Retail 90-Day Delinquencies: Contained at 0.6%.
- Gross Credit Costs: 1.6% in Q1 FY25 vs. 0.8% in Q1 FY24.
- Group PBT: INR205 crores vs. INR233 crores in Q1 FY24.
- Legacy Discontinued AUM: Declined by INR1,597 crores to INR12,975 crores.
- Retail Business Disbursements: INR6,816 crores, growing by 19% YoY.
- Mortgage Business: Grew 37% YoY to INR34,104 crores.
- Used Car Loans AUM: Up 150% YoY.
- Salaried Personal Loans AUM: Up 195% YoY.
- Business Loans AUM: Up 62% YoY.
- Digital Loans AUM: INR3,500 crores, representing 7% of retail AUM.
- Retail OpEx to AUM: 4.9% in Q1 FY25 vs. 5.3% in Q4 FY24 and 6.5% in March 2023.
- Wholesale 2.0 AUM: Grew 11% QoQ to INR7,071 crores.
- Wholesale 2.0 Disbursements: INR1,572 crores in Q1 FY25.
- Wholesale 2.0 Repayments: INR846 crores in Q1 FY25.
- GNPA Ratio: 2.7%.
- NNPA Ratio: 1.1%.
- Net Worth: INR26,863 crores.
- Capital Adequacy: 24.4%.
- Cost of Borrowings: Flat QoQ at 8.9%.
- Fixed to Floating Rate Debt Mix: Improved to 52:48.
Release Date: August 13, 2024
For the complete transcript of the earnings call, please refer to the full earnings call transcript.
Positive Points
- Piramal Enterprises Ltd (BOM:500302, Financial) reported a net profit of INR181 crores in Q1 FY25, up from INR137 crores in FY24.
- Total AUM grew by 10% year on year to INR70,576 crores, with growth AUM increasing by 51% year on year to INR57,601 crores.
- Retail AUM grew by 43% year on year to INR50,530 crores, and Wholesale AUM 2.0 increased by 132% YoY to INR7,071 crores.
- The growth business reported an NII growth of 34% year on year, driven by a 51% year-on-year AUM growth.
- Asset quality remained strong with retail 90-day delinquencies contained at 0.6% and no delinquencies in Wholesale 2.0.
Negative Points
- Gross credit costs, excluding recoveries, increased to 1.6% in Q1 FY25 from 0.8% in Q1 FY24.
- Group PBT declined to INR205 crores in Q1 FY25 from INR233 crores in FY24, representing a PBT ROA of 1.5%.
- Legacy discontinued AUM declined by INR1,597 crores to INR12,975 crores, down 50% year on year.
- The cost of funds increased due to market rate movements and higher leverage, impacting NIM.
- The GNPA and NNPA ratios worsened to 2.7% and 1.1%, respectively, quarter on quarter.
Q & A Highlights
Q: On the provisioning part, both on wholesale as well as retail. In retail Stage 2, we have now created the coverage of almost like 12%-odd compared to that of 3%-odd. What is driving that? And in terms of the wholesale, we have indicated that we utilized the management overlay of INR260-odd crores. Is the overall decline in provisioning purely because of the rundown in the overall wholesale AUM?
A: (Jairam Sridharan, Managing Director - Piramal Capital and Housing Finance Limited) The increase in Stage 2 provision coverage in retail is part of our annual ECL regrounding exercise. We made the choice to increase provisioning levels in Stage 2 to strengthen the balance sheet for the future. On wholesale, the decline in provisioning is due to the usage of provision pools and write-offs on the book.
Q: On the yield side, we are seeing an increase in disbursement yields across product segments. Is this due to rate increases or a shift within the portfolio? And similarly, in wholesale, there is a decline in the Stage 1, Stage 2 pool. Is this due to the rundown of a higher-yielding portfolio?
A: (Jairam Sridharan, Managing Director - Piramal Capital and Housing Finance Limited) In wholesale, the decline in yields is due to the payback from Stage 1 and Stage 2 loans in the legacy book. In retail, the increase in yields is due to both a shift towards higher-yielding businesses and an increase in pricing starting April 1.
Q: There is a big change in the retail customer mix between different geographies in the latest presentation. Is this for the customers acquired in FY24 or the entire portfolio?
A: (Jairam Sridharan, Managing Director - Piramal Capital and Housing Finance Limited) This is for the customers acquired in the last year. We wanted to give a more recent mix of what we are booking right now.
Q: On the management overlay utilized this quarter (INR260 crores), towards which segments was it directed?
A: (Jairam Sridharan, Managing Director - Piramal Capital and Housing Finance Limited) The entirety of the management overlay was directed towards the old wholesale legacy business.
Q: On the legacy book, if we assume a similar kind of LGD of 30%, we need to provide for around INR4,000 crores of provisions. Against that, we are already carrying INR2,000 crores of provisions. Is this math correct?
A: (Jairam Sridharan, Managing Director - Piramal Capital and Housing Finance Limited) Your math is correct. We are working on recovery of the AIF assets and expect to collect about INR700-odd crores of AIF gains this year.
Q: Why is the dividend income in the first quarter nil compared to INR76 crores in the previous year's first quarter?
A: (Jairam Sridharan, Managing Director - Piramal Capital and Housing Finance Limited) Last year, we had a sizable stake in Shriram Group of Companies, which is not there this year, hence the dividend income does not show up.
Q: The gross non-performing asset and net non-performing asset ratios have worsened quarter-on-quarter. What is the view going forward?
A: (Jairam Sridharan, Managing Director - Piramal Capital and Housing Finance Limited) The ratios have worsened slightly, but we have not seen any material worsening of any account in our portfolio. The environment has remained stable, and our numbers have held up well in Q1.
Q: On the business loan segment, is there a breakup between microfinance and business loans?
A: (Jairam Sridharan, Managing Director - Piramal Capital and Housing Finance Limited) The microfinance portfolio is about INR1,400 crores, and the rest is business loans. The biggest stress comes from the core business loans, not from MFI.
Q: The reduction in land and receivables by INR250 crores on a QoQ basis, what led to this reduction?
A: (Ajay Piramal, Executive Chairman of the Board) It was due to the write-off of one land asset. We had made a significant provision last quarter, and the deal consummated during the course of the quarter, leading to the write-off.
For the complete transcript of the earnings call, please refer to the full earnings call transcript.
