Piramal Enterprises shares drop 4% but Motilal Oswal sees stock at Rs 1,280
The Piramal Enterprises management has guided for the lending asset under management (AUM) to double to Rs 1.2-1.3 lakh crore with a 70:30 mix between retail and wholesale by FY28.
- Aug 29, 2023,
- Updated Aug 29, 2023 10:41 AM IST
Shares of Piramal Enterprises fell 4 per cent in Tuesday's trade, a day after the NBFC hosted its Investor Day meet. Motilal Oswal, which attended the meeting, said Piramal’s vision is to become a leading NBFC which will remain dominant in housing finance, but will also focusing on scaling up its other product segments to build a diversified retail book. The brokerage, for now, said its earnings estimates stayed unchanged.
The stock fell 3.96 per cent to hit a low of Rs 1,062.55 on BSE. The management guided for the lending asset under management (AUM) to double to Rs 1.2-1.3 lakh crore with a 70:30 mix between retail and wholesale by FY28. This implies a retail AUM CAGR of 23 per cent and total AUM CAGR of 15 per cent over FY23-28. The management also guided for a consolidated core return on asset (RoA) of 3.0-3.3 per cent and leverage of 3.7 times by FY28.
Improvement in RoA is expected be achieved through improvement in the NIM profile, moderation in opex ratios and achievement of steady state credit costs of 1.7-1.8 per cent.
Motilal Oswal said its earnings estimates remained unchanged as it estimates RoA/RoE of 2.1 per cent or 6 per cent in FY25.
"Using SoTP (Mar’25E based), we value the Lending business at 0.9 times March 2025 BVPS, investments in Shriram insurance businesses at our estimated value, and Pramerica Life Insurance and alternatives at 0.4 times trailing EV and BV, respectively. Maintain our 'Buy' rating with a revised target of Rs 1,280," the brokerage said.
Over the past two years, Motilal Oswal said, Piramal Enterprises has strengthened its balance sheet by running down its wholesale loan book. Piramal Enterprises has made its wholesale book granular with no exposure over 5 per cent of net-worth. It has also improved texture of borrowings driving lower cost of borrowings. Besides, Motilal Oswal said Piramal Enterprises has fortified itself against contingencies with ECL provisions at 4.4 per cent of total AUM.
"We expect a 45 per cent CAGR in retail AUM and a 18 per cent CAGR in total AUM over FY23-25, incorporating the consolidation in the wholesale book in the next few quarters," Motilal Oswal said.
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Shares of Piramal Enterprises fell 4 per cent in Tuesday's trade, a day after the NBFC hosted its Investor Day meet. Motilal Oswal, which attended the meeting, said Piramal’s vision is to become a leading NBFC which will remain dominant in housing finance, but will also focusing on scaling up its other product segments to build a diversified retail book. The brokerage, for now, said its earnings estimates stayed unchanged.
The stock fell 3.96 per cent to hit a low of Rs 1,062.55 on BSE. The management guided for the lending asset under management (AUM) to double to Rs 1.2-1.3 lakh crore with a 70:30 mix between retail and wholesale by FY28. This implies a retail AUM CAGR of 23 per cent and total AUM CAGR of 15 per cent over FY23-28. The management also guided for a consolidated core return on asset (RoA) of 3.0-3.3 per cent and leverage of 3.7 times by FY28.
Improvement in RoA is expected be achieved through improvement in the NIM profile, moderation in opex ratios and achievement of steady state credit costs of 1.7-1.8 per cent.
Motilal Oswal said its earnings estimates remained unchanged as it estimates RoA/RoE of 2.1 per cent or 6 per cent in FY25.
"Using SoTP (Mar’25E based), we value the Lending business at 0.9 times March 2025 BVPS, investments in Shriram insurance businesses at our estimated value, and Pramerica Life Insurance and alternatives at 0.4 times trailing EV and BV, respectively. Maintain our 'Buy' rating with a revised target of Rs 1,280," the brokerage said.
Over the past two years, Motilal Oswal said, Piramal Enterprises has strengthened its balance sheet by running down its wholesale loan book. Piramal Enterprises has made its wholesale book granular with no exposure over 5 per cent of net-worth. It has also improved texture of borrowings driving lower cost of borrowings. Besides, Motilal Oswal said Piramal Enterprises has fortified itself against contingencies with ECL provisions at 4.4 per cent of total AUM.
"We expect a 45 per cent CAGR in retail AUM and a 18 per cent CAGR in total AUM over FY23-25, incorporating the consolidation in the wholesale book in the next few quarters," Motilal Oswal said.
Also read: APL Apollo Tubes shares in focus on report promoters may sell 0.85% stake via blocks deals today
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