Piramal Enterprises Q2 results: Net profit jumps 15% to Rs 555 crore, diversified businesses propel revenue higher

Despite challenges in the financial sector, focus on diversified businesses such as pharma contract manufacturing, knowledge management, consumer healthcare and financial sector helped billionaire Ajay Piramal-led Piramal Enterprises post 15 per cent revenue growth for the second quarter of financial year 2019/20 and 18 per cent for the entire first half of 2019/20.

Consolidated revenues increased to Rs 3,604 crore from Rs 3,144 crore in the same quarter a year ago and from Rs 6,047 crore in H1FY19 to Rs 7,110 crore in H1FY20. The major boost (38 per cent of the company's revenues were earned in foreign currency in the first half) for Piramal came mainly from pharma contract manufacturing and knowledge management, which had been experiencing margin pressure over the past few years. Foreign currency-denominated revenues in Q2FY20 stood at Rs 1,398 crore and Rs 2,671 crore in H1FY20.

Net profit for the quarter posted 15 per cent growth at Rs 555 crore compared to Rs 480 crore in the same quarter the previous year. Net profit for the half year stood at Rs 1,004 crore, 145 per cent more than the Rs 411 crore in the first half of last year.

Financial services business, which had been growing phenomenally since its launch in 2012, has slightly slowed down for the first time. The business, which now gives 54 per cent of the revenues, grew 13 per cent in the second quarter at Rs 1,954 crore and 21 per cent in the second half at Rs 3,968 crore. Total inflows from the sector were Rs 45,000 crore for the past one year (including fresh borrowings, repayments and prepayments), equivalent to 85 per cent of the loan book, which stood at Rs 53,055 crore as of September.

"Our diversified business model has enabled us to deliver resilient performance during this quarter, despite continued liquidity tightening in the NBFC sector," said Ajay Piramal, Chairman, Piramal Enterprises.  The financial Services business received inflows of Rs 45,000 crore over the past one year and brought down commercial paper (CP) borrowings by 92 per cent to Rs 1,480 crore, reflecting the quality of underwriting, client selection and risk management practices. He added that Piramal Enterprises remain committed to bringing in additional equity in the company in the near future, which will further bolster plans to tap both organic and inorganic opportunities across businesses. Reportedly, Japanese banking major Softbank is in discussions with the company for an equity investment, though Piramal has not confirmed the discussions yet.

While pharma services, which contributed 37 per cent of sales in the second quarter, grew 19 percent to Rs 1,316  crore, global pharma revenues grew by 17 per cent to Rs 1,204 crore. For the half year, the growth was 16 per cent and 13 per cent, respectively for pharma and global pharma services, which saw an addition of 24 new clients. Earnings before interest, tax, depreciation and amortisation (EBITDA) margins for global pharma business was 24 per cent. It hovered in the range of 12-18 per cent in previous years.

India consumer products recorded highest growth (39 per cent) in Q2FY20 at Rs 112 crore. The segment grew 53 per cent in the first half of FY20 at Rs 222 crore. Healthcare knowledge management business grew 14 per cent each in Q2 at Rs 333 crore. It came in at Rs 652 crore in H1FY20. EBITDA margins for the business improved by 24 per cent as the company streamlined operating processes and leveraged India presence.

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