After demerger of pharma business, up to 37% upside seen in Piramal Enterprises

The brokerage sees a potential increase of nearly 37 per cent from the current market price of Rs 964.65 for the stock in the 12 months.

On Friday’s trade, the scrip ended 2.33 per cent lower at Rs 964.65. The stock fell about 64 per cent in the last year, while it has decreased nearly 42 per cent in the last three months.

After the demerger, PIEL now trades as a diversified NBFC registered with the RBI.

Integration of DHFL has progressed well. The Retail lending business continues to gain traction, with an improvement in the disbursement run rate. Multiple partnerships with FinTechs and Consumer-Techs have aided the momentum in the Embedded finance product segment, said brokerage firm Motilal Oswal.

The brokerage expects the company’s wholesale loan book to continue to moderate as the firm looks to aggressively create provisions on stressed exposures, and then monetize them.

Within retail, Motilal expects a disbursement/AUM CAGR of ~90 per cent/~30 per cent over FY22-25E. Consolidation in the wholesale book and strong growth in the retail book will result in the proportion of retail loans increasing to ~55 per cent of the loan mix by FY25E.

The management will now be looking to scale up its loan book, which will entail a consolidation in the wholesale book and strong growth in retail. Even the retail mix will improve, which may translate into a decline in borrowing costs and an upgrade in its credit rating, said Motilal Oswal.

Motilal further added that the company has articulated targets that it aspires to achieve in the financial services business by FY27. These include an improvement in the retail loan mix to 60-70 per cent, a doubling of AUM and an improvement of its net debt-to-equity ratio to 3.5-4.5x.

This will be achieved by running down its wholesale exposures, diversifying the retail mix, and expansion of the distribution network to 500-600 branches, with a presence in ~1,000 locations within the next five years, the brokerage added.

Motilal estimated a PAT CAGR of 37 per cent over FY22-25, resulting in a FY25 RoA/RoE of 2.2 per cent/~10 per cent.

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