Piramal Enterprises is intensifying its efforts to expand its net interest margins through multiple strategic levers in order to improve RoA. The company expects NIM expansion to be driven by three levers - linear improvement in fee income, aided by its previously unrecognized trail fee income; increase in the share of unsecured retail assets to ~30% from ~23% currently in the next few years; and a reduction in the cost of borrowings aided by repo rate cuts.
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Motilal Oswal Report
Piramal Enterprises Ltd.’s strategic shift toward building a granular and diversified retail franchise, alongside a calibrated wholesale 2.0 book, continues to gain traction. The company has demonstrated steady progress on asset quality, with volatility now largely behind and credit costs expected to remain stable.
With new product launches such as co-branded credit cards and gold loans in the pipeline, the company is expanding its fee income base and diversifying its earnings profile.
Our FY26 earnings estimate factors in exceptional gains from the Piramal Imaging business, gains from AIFs and no tax incidence in the foreseeable future. Because of the uncertainty and unpredictability around the timing of the monetization of its stake in Shriram Life and General Insurance, we have not factored it into our estimates. It does, however, provide streams of one-off gains, which can help to offset credit costs required to dispose of residual (if any) stressed legacy AUM.
While the company anticipates greater earnings stability and an improved outlook going forward, its return metrics remain modest, with RoA and RoE estimated at 1.9% and 8%, respectively, for FY27E.
We value the lending business at 0.8x FY27E P/BV. Reiterate our Neutral rating on the stock with a revised target price of Rs 1,250 (premised on Mar’27E SOTP).
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