Release Date: October 23, 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 consolidated net profit of INR163 crores for Q2 FY25, with the growth business contributing INR130 crores.
- The company's total AUM grew by 12% year-on-year to INR74,692 crores, driven by a 45% year-on-year increase in the growth wholesale AUM.
- Retail AUM grew by 42% year-on-year, now forming 73% of the total AUM, indicating strong performance in the retail lending segment.
- The company successfully diversified its borrowing base, with securitization now at 14% of total borrowings, up from 4% in the same quarter of FY24.
- Piramal Enterprises Ltd (BOM:500302) has made significant progress in reducing its legacy discontinued wholesale AUM, which is down 72% since March 2022.
Negative Points
- The company's gross credit cost increased to 1.8% in Q2 FY25 from 1.6% in Q1, indicating rising credit risks.
- The digital loan business faced constraints, with disbursements reducing significantly from previous quarters.
- There is a noted increase in risk within the unsecured business loans segment, with rising delinquency trends.
- The legacy discontinued AUM still stands at INR12,000 crores, representing 16% of the total AUM, which the company aims to reduce further.
- The retail credit cost is expected to increase in the coming quarters due to the challenging risk environment.
Q & A Highlights
Q: How does Piramal Enterprises plan to reduce the legacy AUM by INR 4,500 to 5,000 crores in the second half of the fiscal year?
A: Yeshwant Nadkarni, CEO of Wholesale Lending, explained that the reduction will be achieved through recoveries from assets, refinancing, asset sales, and accelerated repayments. The company expects these actions to be net neutral in terms of financial impact.
Q: What is the breakdown of the total credit cost of INR 317 crores reported this quarter between growth and legacy businesses?
A: Jairam Sridharan, CEO of Piramal Capital and Housing Finance Limited, stated that the growth business credit cost is INR 223 crores, with the remainder attributed to the legacy business, including a gain of INR 77 crores.
Q: Given the current asset quality environment, how does Piramal view the potential for increased retail credit costs in the coming quarters?
A: Jairam Sridharan acknowledged the challenging environment and indicated that retail credit costs could rise further. The company has been tightening underwriting criteria to mitigate risks and expects the credit cycle to continue for some time.
Q: What is the company's outlook on growth, particularly in the retail segment, given the RBI's concerns about high growth rates in NBFCs?
A: Jairam Sridharan mentioned that while the retail segment has been growing rapidly, the overall AUM growth is modest at 12%. The company plans to moderate retail growth rates as the legacy book runs down, aiming for a medium-term growth rate of 25-26%.
Q: Can you provide an update on the progress of asset monetization, particularly in the real estate sector?
A: Yeshwant Nadkarni confirmed that significant progress has been made in asset monetization, with expectations of achieving the targeted gains in the next two quarters. The company remains confident in its ability to meet its recovery targets.
For the complete transcript of the earnings call, please refer to the full earnings call transcript.
