Motilal Oswal Financial Services

28 June 2020

Update | Sector: Financials - NBFC

Piramal Enterprises

BSE SENSEX

35,171

S&P CNX

10,383

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CMP: INR1,343

TP: INR1,600 (+19%)

Simplifying group structure

Pharma benchmark valuation established at INR210b



Buy

Stock Info

Bloomberg

Equity Shares (m)

M.Cap.(INRb)/(USDb)

52-Week Range (INR)

1, 6, 12 Rel. Per (%)

12M Avg Val (INR M)

Free float (%)



PIEL IN

199

302.9 / 4

2050 / 608

33/-2/-16

2749

53.9

2022E

145.8

22.8

15.5

65.3

1,489

20.6

0.9

1.7



Financials Snapshot (INR b)

Y/E March

2020

2021E

Revenues

130.7

134.2

EBITDA

17.9

20.0

PAT

-5.5

12.6

EPS (INR)

-24.5

56.0

EPS Gr. (%)

-135

-328

BV/Sh. (INR)

1,274

1,443

Payout (%)

Valuations

P/E (x)

24.0

P/BV (x)

1.1

0.9

Div. Yield (%)

1.0

1.5

Shareholding pattern (%)

As On

Mar-20

Promoter

46.1

DII

9.7

FII

30.2

Others

14.1



Piramal Enterprises’(PIEL) has announced 20% stake sale in the Pharma division

with fresh equity infusion of ~USD490m by the Carlyle group. The deal values the

Pharma division at an EV of USD2.8b (INR210b) and factors in net debt reduction

to INR25b from INR42b.

The stake sale is another step on the part of PIEL toward simplifying the group

structure and effectively demerging the Pharma division in the ensuing quarters.

Recently, PIEL sold its DRG division. The company has also made its intention

clear of exiting its investments in Shriram group. In our view, ultimately PIEL

would have a simplified structure with two listed businesses

–

Piramal Pharma

Ltd (PPL) and PIEL (Listed Company will be for Financial Services business).

The tough environment of the past 1-1.5 years has prompted PIEL to undertake

various steps to protect its balance sheet. These steps include (a) consolidating its

loan book and reducing the share of large exposure, (b) raising significant capital

and reducing leverage, and (c) now preparing a strategy to foray into retail

products in the Lending business.

More importantly, the company has been on a deleveraging exercise over the

past year. It divested 10% stake in SHTF and also raised INR54b via a mix of

preferential issue to CDPQ and a rights issue. Post this, it sold its DRG business for

USD900m. Now, divestment of 20% stake in its Pharma business has already

established the benchmark valuation.

Using SOTP method (FY22E based), we value the Lending business at 1x BVPS, the

Pharma business at 12x EV/EBITDA (in line with benchmark valuation and peers)

and the Shriram group investments at our TP for its subsidiaries. PIEL has excess

net worth of ~INR30b, which we have valued at 1x Cash. Maintain Buy with a

revised TP of INR1,600.

Dec-19

46.1

9.9

29.9

14.2

Mar-19

49.7

6.3

27.7

16.4

Unlocking value in Pharma business

PIEL has announced that all Pharma related businesses at the group level would

be merged into a wholly-owned subsidiary, Piramal Pharma Ltd (PPL). Further,

PPL would get strategic growth investment from the Carlyle group for 20% equity

stake in the company. EV for the proposed transaction is USD2.8b with an upside

of USD360m if PPL achieves certain financial parameters in FY21. According to the

manegement, PIEL would utilize part of the stake sale money to reduce net debt

to INR25b from INR42b and the rest could be utilized for inorganic opportunities.

With EV of USD2.8b (INR210b) and debt reduction to INR25b, the equity value

works out to INR185b with a realized upside value of INR212b (USD360m).

Accordingly, Carlyle would invest USD490m for the proposed 20% stake and an

additional USD72m if the upside is triggered. In our view, this step to effectively

simplify the group structure is in the right direction and would ultimately lead to

the listing of the Pharma division.

FII Includes depository receipts

Stock Performance (1-year)

Piramal Enterp.

Sensex - Rebased

2,500

2,000

1,500

1,000

500

Significant reduction in consolidated leverage

Over the past year, PIEL has focused on reducing leverage.

This was done by (a)

rundown of the loan book in FY20, (b) stake sale of INR23b in SHTF, (c) INR17.5b

preferential share allotment to CDPQ, (d) INR36.5b rights issue, and (e)

Research Analyst: Alpesh Mehta

(Alpesh.Mehta@MotilalOswal.com);+91 22 6129 1526 |

Tushar Manudhane

(Tushar.Manudhane@MotilalOswal.com); +91 022 6129 1536

Nitin Aggarwal

(Nitin.Aggarwal@MotilalOswal.com); +91 22 6129 1542 |

Piran Engineer

(Piran.Engineer@MotilalOswal.com); +91 22 6129 1539

Investors are advised to refer through important disclosures made at the last page of the Research Report.

Motilal Oswal research is available on www.motilaloswal.com/Institutional-Equities, Bloomberg, Thomson Reuters, Factset and S&P Capital.

Piramal Enterprises

USD900m sale of DRG.

Consolidated leverage declined from 2.1x in FY19 to 1.4x in

FY20. Leverage of the FS business declined from 3.9x to 2.6x during same period.

Divestment of 20% stake in its Pharma business would further reduce net debt at the

group level.

Post the pharma stake sale, the company would be sitting on a

comfortable consolidate net debt/equity of ~1.1x.

Financial Services – Thrust on strengthening balance sheet

In FY20, management took various steps to strengthen the Financial Services (FS)

business. These include (a) increasing the share of long-term borrowings, (b) additional

capital infusion (INR40b - CAR at 30%+ now), (c) aggressive provisioning (~5.8% of loans

as at FY20 v/s ~1.9% in FY19), and (d) sell-down of portfolios. While loans were down

10% YoY, net worth in the FS business increased to INR156b from INR114b (despite

aggressive provisions of INR19b in 4QFY20).

In addition, the company trimmed

exposure to its top-3 clients (refer

Exhibits 10 & 11).

While the company was focused

on foraying into Retail lending, the COVID-19 situation is likely to delay it. In the ensuing

quarters, the company is expected to focus completely on augmenting long-term

borrowings, collections, deleveraging, organizing infrastructure and getting its strategy

in place to launch retail products.

Pharma segment - Niche products/capabilities provide robust outlook

PIEL has built robust Pharma business model, which offers (a) Contract Development

and Manufacturing Outsourcing (CDMO; 58% of sales), (b) Complex Hospital

Generics (34% of sales), and (c) India consumer products (8% of sales). The company

delivered sales growth of 13% YoY and strong EBITDA growth of 41% YoY in FY20.

PIEL’s presence across the manufacturing/distribution value chain and consistent

compliance has further strengthened its outlook for the next 3-5 years. Accordingly,

we expect 13%/10% CAGR in Pharma sales/EBITDA over FY20-22E. This would be led

by (a) superior execution of projects under CDMO, (b) increased market share in

Inhalation Anaesthesia portfolio, and (c) enhanced marketing efforts in the

Consumer Healthcare segment.

Valuation and view

Over the past year, PIEL has curtailed disbursements in wholesale lending and

reduced exposure to its top-10 clients. In our view, FY21 would remain a year of

caution for the FS business with the company continuing its focus on strengthening

the balance sheet. With lumpy exposures and tough macros, there could be high

incremental provisioning over the next one year. We bake in 3% credit costs each

for the next two years. The Pharma business is witnessing increased traction with

strong EBITDA margins of 26%. This business is likely to be a key value driver in the

near term. Using SOTP, we arrive at a TP of

INR1,600

(FY22E based). Maintain

Buy.

Exhibit 1: SOTP (FY22E based)

Value

Lending Business

Pharma Business

Shriram Group

Unallocated NW

Total Value

Current market cap.

Upside (%)

(INR B) Value (USD B)

178

2.4

132

379

318

19.1

1.8

0.5

0.4

5.1

4.2

19.1

INR per share

751

558

159

131

1,600

1,343

19.1

% To Total

100

Rationale

1.0x PBV

Pharma EV/EBITDA 12x; EV of INR205b; 80% Stake;

20% Holdco dis

Based on our TP for SHTF and SCUF

1x PBV (Net of DTA, OCI and Shriram Group

allocated NW)

Implied 1.1x Consolidated BV

Source: MOFSL, Company

28 June 2020

Piramal Enterprises

Pharma: Well placed to enhance value

Pharma business benchmark valuation established at USD2.8b

Unlocking value in Pharma division

PIEL has announced 20% stake sale in the Pharma business with fresh capital

infusion from the Carlyle group at EV of USD2.8b. The deal factors in net debt

reduction to INR25b from INR42b. Effectively, Carlyle would bring in USD490m for

20% stake. The EV also has an upside of USD360m if certain financial parameters are

met in FY21. While the deal valuation has net debt of INR25b, it factors in certain

expected acquisitions. Our estimates do not factor in such acquisitions; accordingly,

we reduce net debt from INR42b to INR5b. The deal effectively values the Pharma

division at 12x EV/EBITDA v/s our earlier valuation of 10x. Management has

indicated that this fresh investment would be used as growth capital for the Pharma

business to expand capacity across sites as well as to tap attractive acquisition

opportunities within and outside India.

Simplifying Pharma business structure in the group

All Pharma related businesses at the group level would be merged into a wholly-

owned subsidiary, Piramal Pharma Ltd (PPL). PPL would include (a) Piramal Pharma

Solutions, an end-to-end Contract Development and Manufacturing (CDMO)

business; (b) Piramal Critical Care, a Complex Hospital Generics business selling

specialized products to over 100 countries, (c) Consumer Products Division, a

Consumer Healthcare business selling over-the-counter products in India; and (d)

PEL’s investment in the joint venture with Allergan India (a leader in Ophthalmology

in the domestic market) and Convergence Chemicals Private Limited.

Pharma – Promising outlook in all major segments

PIEL delivered ~13% revenue CAGR over FY15-20, driven by 10% sales CAGR in the

CDMO business, 20% sales CAGR in the Hospital business and 12% sales CAGR in the

India Consumer Healthcare business. In FY20, revenues grew 13% YoY – the CDMO

business grew in line with revenues at 13% while the Complex Hospital Generics

business grew 11%. The smaller India Consumer business posted strong 25% YoY growth

in FY20. Out of the total revenues, CDMO accounted for 58%, the Hospital business

contributed 34% and the Consumer business accounted for 8%. Overall, we expect the

PIEL’s Pharma business to deliver 12.8% sales CAGR to INR69b over FY20-22E.

Exhibit 2: Healthy growth trajectory for Pharma segment

Pharma revenue (INR b)

Growth YoY (%)

13.2

12.7

12.9

Exhibit 3: Pharma revenue composition (FY20)

10.7

11.1

12.3

11.0

10.7

CDMO

Complex hospital

generics

India consumer

healthcare

31.2

34.7

38.9

43.2

47.9

54.2

61.1

68.8

Source: MOFSL, Company

28 June 2020

Piramal Enterprises

Niche capabilities/integrated service/customer adds to lead CDMO biz

The CDMO business is the largest segment in PIEL’s Pharma business. It accounted

for 58% of revenues in FY20. The CDMO business provides integrated solutions –

from drug discovery support to commercialization of on-patent and off-patent

drugs. Its strong and varying capabilities in niche products such as HPAPIs (High

potent APIs), Antibody Drug Conjugates (ADCs) and injectable and hormones has

helped the company to serve the increased client base and expand margin. To

generate sufficient capacity for future demand and to become a partner of choice

for large global pharma/biotech companies, PIEL has (a) enhanced API capabilities at

Morpeth (UK facility), (b) expanded OSD capacity at the Pithampur facility, and (c)

added 2 new API reactor suites at Aurora, Canada. Accordingly, the new customer

addition has increased business and should drive 14% CAGR in the CDMO business

to INR41b over FY20-22E.

Exhibit 4: CDMO business on healthy growth trajectory

CDMO (INR b)

16.0

Growth YoY (%)

13.3

9.3

5.4

20.1

23.3

24.5

13.8

14.0

12.4

3.8

25.5

27.8

31.5

35.9

40.9

Source: MOFSL, Company

Hospital generics – Product addition and market share gain key drivers

The Complex Hospital Generics business grew 13% YoY in FY20 and accounts for

34% of Pharma revenues. In addition to products developed in-house, PIEL has

expanded its product portfolio through the inorganic route – it acquired 5 products

from Janssen Pharma (JnJ) in 2016 and 4 products from Mallinckrodt (2 products in

2017 and another 2 in 2018). PIEL’s portfolio is present in select therapies like

Anesthetics, Pain Management, Anti-Infectives and controlled substances (in

different complex dosage forms such as injectable, inhaled products and

intrathecal). It has 30% market share in Inhaled Anesthesia products in North

America and is one of the only 3 generics’ companies approved for Sevoflurane in

Japan. It is the only branded generic company approved for Fentanyl and has

leading market share for the drug in Japan. These products are primarily promoted

by PIEL’s direct sales force in the US, the UK and Japan. FY20 performance of 11%

YoY growth was led by better traction in Isoflurane, Sevoflurane, injectable pain and

anesthesia products. Synergies from acquired products are also getting reflected in

the performance. We expect 11.7% sales CAGR in this segment led by increased

market share in the Inhalation Anesthesia portfolio and on addition of products like

Desflurane. PIEL is also continuing work on the product pipeline to drive future

growth in this segment.

28 June 2020

Piramal Enterprises

Exhibit 5: Growth path to stabilize and gradually improve

Complex hospital generics (INRb)

34.3

21.2

16.0

5.1

7.6

FY15

8.8

FY16

10.6

FY17

14.3

FY18

16.7

FY19

18.5

FY20

20.7

FY21E

23.1

FY22E

16.8

Growth YoY (%)

11.0

11.5

12.0

Source: MOFSL, Company

Consistent compliance boosts customer confidence for increased

outsourcing

PIEL’s facilities have completed 200+ regulatory inspections from different

authorities, including the USFDA, and have undergone 1,100+ customer audits.

Currently, there is no pending USFDA compliance issues for any of the plants. Thus,

clean regulatory record of its facilities reduces the risk of adverse regulatory actions

in the near term.

India Consumer business – Strategic initiatives reflecting in performance

PIEL’s India Consumer business grew a steep 25% YoY in FY20, led by mass media

campaigns. Focus on E-commerce channels and use of technology should also

improve distribution efficiency. Its portfolio includes well known consumer brands

like Saridon, Lacto Calamine, iPill, etc. The products are available across 280k outlets

in India across 1,500+ towns and are supported by a field force of 1,700+ sales

representatives. While brand awareness campaigns generate pull for its products,

use of analytics to improve distribution and listing of products on E-commerce

platforms has been able to translate marketing into actual sales. Considering the

COVID-19 led slowdown, we expect 15.5% sales CAGR over FY20-22E, driven by

enhanced marketing effort and increased market share.

Exhibit 6: PIEL ended India Consumer Healthcare business in FY20 on strong note

India consumer healthcare

43.7

16.3

25.1

7.4

-7.7

-3.5

13.0

18.0

Growth YoY (%)

2.4

FY15

2.6

FY16

3.8

FY17

3.5

FY18

3.3

FY19

4.2

FY20

4.7

FY21E

5.6

FY22E

Source: MOFSL, Company

28 June 2020

Piramal Enterprises

EBITDA margin at all-time high

For the Pharma segment, EBITDA grew 41% YoY to INR14b in FY20, much faster than

the 13% growth in top line. The company has been able to continuously grow

margins faster than sales, leading to substantial margin expansion over the past 5

years. Over the past 5 years, the company delivered EBITDA CAGR of 28%, leading to

margin improvement of 1,200bp+ over the same period (from 14.2% in FY15 to

26.5% in FY20). Addition of high margin products, increasing dosage offerings,

expanding manufacturing capabilities, improving synergies from acquired products

and better operating leverage in the Consumer business has led considerable margin

expansion for PIEL.

Cautious stance on Financial Services business

Focus on balance sheet strengthening in the near term

Consolidating the Lending business



After delivering 60%+ CAGR in the loan book over FY16-19, the company has

turned cautious given the external environment. Thus, its loan book declined

10% YoY in FY20.

Moreover, the Corporate Lending segment was more de-

focused. As a result, its share in the total loan book declined 500bp YoY to 15%

in FY20.

The company’s stance is unlikely to change in FY21 too. We expect its focus to

remain on balance sheet strengthening with increase in the share of long-term

borrowings and sell-down of portfolio as and when an opportunity arises.

Near-term focus of the company would be on getting strategy and Infrastructure

in place for its Consumer Lending foray. However, actual lending is expected to

be some time away due to challenges posed by the COVID-19 situation.

Exhibit 8: Share of retail home loans increasing (%)

Real Estate

2.9

21.6

3.4

22.5

4.4

22.3

7.1

20.4

Corporate

9.2

19.9

10.8

19.2

Retail HL

12.0

18.0

11.9

17.9

10.9

15.4

Exhibit 7: Focus on loan book consolidation

Loan book (INRb)

Growth (%)

75.5

74.1

73.3

72.5

70.9

70.0

70.2

73.7

-10

250

FY17

422

FY18

566

FY19

510

FY20

510

FY21E

561

FY22E

Source: MOFSL, Company

Nil commercial paper;

Started securitization too

Overhauled the borrowing mix; Adequate liquidity on the balance sheet



Post the IL&FS crisis, the company remained focused on (a) reducing the share

of CPs from an average 17-18% of borrowings earlier to ‘Nil’, and (b) starting

securitization as a means to raise funds.

Moreover, PIEL is focused on long-term borrowings in order to mitigate ALM

mismatch – it raised INR135b of long-term borrowings in FY20.

As of FY20, PIEL had INR90b of cash and undrawn bank lines as liquidity.

28 June 2020

Piramal Enterprises

Exhibit 9: CP now down to zero; Started securitization in the past few quarters

Term loans

NCDs

Securitisation

Others

Source: MOFSL, Company

Only 3 exposures comprise

10%+ of net worth currently

v/s 10 exposures in FY19

Reducing concentration risk



The company reduced its top-10 wholesale exposures by nearly 25% YoY to

~INR140b in FY20.

More importantly, it had committed to reducing each of the top-3 exposures to

sub-15% of net worth (of the financial services business) each. It managed to

reduce two exposures to below the threshold, while the other exposure is

expected to come down in FY21.

Even the number of accounts that comprised 10%+ of net worth is down from

10 to 3 YoY.

Exhibit 11: Number of loan accounts

> 10% of networth

142

> 15% of networth

Exhibit 10: ~20% reduction in top-10 exposures (INR b)

Top 10 exposures

184

FY19

FY20

Source: MOFSL, Company

FY19

FY20

Source: MOFSL, Company

Aggressive provisioning to strengthen the balance sheet



PIEL took INR19b COVID-19 related provisions in 4QFY20. This amounts to 3.7%

of the loan book and 4.7% of the loan book under moratorium. Overall provisioning

stands at ~5.8% of loans v/s ~1.9% a year back.

Considering lumpiness of the exposures and tough macros, we continue to bake in

higher credit cost – 3% each for FY21/22E.

28 June 2020

Piramal Enterprises

Exhibit 12: Overview of the loan book under moratorium and COVID-19 provisions taken in 4QFY20 for some key NBFCs

Company

Vehicle Financiers

CIFC

MMFS

STF

SUF

Diversified

LTFH

BAF

SCUF

Housing Finance

HDFC

PNBHF

Wholesale

PIEL

ABCL

Moratorium %

Covid Provisions

(INR b)

5.0

5.7

9.1

0.3

3.1

9.0

4.3

5.5

4.7

19.0

1.6

Loans (INR b)

Covid Prov. (% of

loans)

0.9%

0.1%

0.3%

0.6%

1.6%

0.1%

0.7%

3.7%

0.3%

Covid Prov. (% of

morat loans)

1.2%

0.9%

0.1%

0.9%

2.4%

2.5%

0.5%

1.4%

4.7%

1.0%

Source: MOFSL, Company

570

650

1,022

299

995

1,414

266

4,509

676

510

471

Valuation and view

Significant capital to face contingency/capitalize on emerging opportunities



Over the past few quarters, PIEL took aggressive steps to deleverage and

strengthen its balance sheet at the consolidated level. Further, for the FS

business, focus is on liquidity management, augmenting long-term resources,

reduction in lumpiness of exposures, capital infusion and aggressive

provisioning. While PIEL has plans to foray into Consumer Lending products, we

believe it would utilize the current environment to get Infrastructure and

strategy in place. However, actual lending may be some time away.

The pharma business is witnessing increased traction with strong EBITDA

margins of 26%. We are now valuing the Pharma division in line with the

benchmark EV of INR210b (USD2.8b), leading to an EV/EBITDA of ~12x FY22E.

This is largely in line with the recent re-rating of the sector based on reduced

logistics issue, improving capacity utilization, better patient-doctor connect and

increased growth visibility for the US generic segment.

Outlook for the FS business remains challenging due to further weakness caused

by COVID-19 in the underlying segment.

The INR19b one-time provisions have

helped strengthen the balance sheet;

however, we do acknowledge that there

could be incremental provisioning over the next year. We expect elevated credit

cost over the next two years (3% for each year). We bake in total provisioning of

~INR60b (~12% of AUM), including existing provisioning of INR30b by FY22E.

Despite aggressively capitalizing the FS business in FY20 (Tier I of 30%, capital

infusion of ~INR40b), PIEL is still sitting with an unallocated net worth (ex OCI

and DTA) of INR34b. With significant capital, PIEL is well placed to capture any

emerging opportunities in both Pharma and the FS segments.

28 June 2020

Piramal Enterprises

Exhibit 13: SOTP (FY22E based)

Value

(INR B)

178

132

379

318

19.1

Value (USD

2.4

1.8

0.5

0.4

5.1

4.2

19.1

INR per

751

558

159

131

1,600

1,343

19.1

% To Total Rationale

100

1.0x PBV

Pharma EV/EBITDA 12x; EV of INR205b; 80% Stake; 20% Holdco dis

Based on our TP for SHTF and SCUF

1x PBV (Net of DTA, OCI and Shriram Group allocated NW)

Implied 1.1x Consolidated BV

Lending Business

Pharma Business

Shriram Group

Unallocated NW

Total Value

Current market cap.

Upside (%)

Source: MOFSL, Company

Valuation Matrix

Rating

FY22E

HFCs

HDFC*

LICHF

PNBHF

REPCO

Vehicle fin.

SHTF

MMFS

CIFC

Diversified

BAF

SCUF

LTFH

MUTH

MAS

Buy

Neutral

Buy

Neutral

Buy

Neutral

Buy

CMP

(INR)

1,770

271

223

134

705

177

202

2,904

696

1,090

671

Mcap

(USDb)

40.5

1.8

0.5

0.1

2.1

1.5

2.2

22.9

0.6

1.9

5.8

0.5

P/E (x)

FY21E

16.6

6.7

15.0

3.0

10.6

22.2

21.2

43.4

7.0

8.0

12.7

21.8

FY22E

12.6

5.8

4.7

2.8

6.0

12.3

15.6

28.4

6.1

5.9

10.8

18.2

P/BV (x)

FY21E

1.8

0.7

0.5

0.4

0.8

0.9

1.9

4.8

0.6

0.9

3.1

3.3

FY22E

1.3

0.6

0.4

0.7

0.9

1.7

4.2

0.5

0.8

2.5

2.9

RoA (%)

FY21E

1.6

1.0

0.3

2.3

1.4

0.7

1.2

2.4

2.1

1.6

6.4

3.7

FY22E

1.5

1.1

1.0

2.4

1.2

1.6

3.4

2.4

2.1

6.6

4.0

RoE (%)

FY21E

11.2

11.0

3.1

14.4

8.1

4.2

9.4

11.8

8.7

11.3

26.6

16.0

FY22E

11.0

11.5

9.3

13.6

13.0

7.2

11.6

15.9

9.2

13.8

25.4

16.9

28 June 2020

Piramal Enterprises

Financials and valuations

INCOME STATEMENT

FY16

FY17

FY18

FY19

FY20

Revenues

63,815

85,468

106,394

132,153

130,683

Change (%)

24.6

33.9

24.5

24.2

-1.1

HealthCare

34,670

38,927

43,220

47,860

54,189

Financial Services

17,397

33,515

49,816

70,634

76,494

Info Mgmt

11,559

12,224

12,092

13,322

Others

188

802

1,266

337

EBITDA*

13,726

21,007

29,611

36,582

17,889

Change (%)

57.8

53.0

41.0

23.5

-51.1

HealthCare

3,266

6,028

8,001

9,809

14,336

Financial Services #

8,185

12,837

19,933

24,507

3,553

Info Mgmt

2,276

2,143

1,677

2,266

EBIT*

11,172

17,190

24,838

31,380

12,686

Change (%)

92.6

53.9

44.5

26.3

-59.6

HealthCare

1,151

3,124

4,244

5,880

9,208

Financial Services #

8,159

12,813

19,897

24,431

3,478

Info Mgmt

1,862

1,254

697

1,069

Unallocated Inc/(Exp)

-4,028

-3,988

-5,200

-6,605

-3,510

Core PBT

7,144

13,202

19,638

24,775

9,176

Change (%)

110.6

84.8

48.7

26.2

-63.0

Exceptional Items

457

-99

-4,656

Reported PBT

7,600

13,103

19,638

20,119

9,176

Taxes

495

2,281

6,928

8,611

19,604

Tax Rate (%)

6.5

17.4

35.3

42.8

213.7

PAT

7,105

10,821

12,710

11,507

-10,429

Change (%)

-73.6

52.3

17.5

-9.5

-190.6

Minority Interest

-3

Share from Asso. Co

1,942

1,699

2,801

3,194

4,896

PAT Post MI

9,047

12,523

15,511

14,701

-5,533

Change (%)

-68.3

38.4

23.9

-5.2

-137.6

Dividend (Including Tax)

3,635

4,348

5,415

6,065

3,500

* Ex Exceptional, # Post interest expenses; FY16-18 nos based on IND AS; FY18 Excluding one off DTA of INR35.6b

BALANCE SHEET

Y/E MARCH

Equity Share Capital

Reserves (Ex OCI)

Networth

OCI

Networth

Change (%)

Borrowings

Change (%)

Other liabilities

Change (%)

Total Liabilities

Loans+Investments

Change (%)

Goodwill

Fixed Assets

Other assets

Change (%)

Total Assets

FY21E

134,239

2.7

61,065

73,174

(INR Mn)

FY22E

145,811

8.6

68,817

76,994

19,997

11.8

15,266

4,731

14,619

15.2

9,888

4,731

490

15,109

64.7

15,109

3,777

25.0

11,332

-208.7

4,363

15,695

-383.7

5,493

22,776

13.9

17,204

5,572

17,148

17.3

11,576

5,572

488

17,636

16.7

17,636

4,409

25.0

13,227

16.7

5,335

18,562

18.3

6,497

FY16

345

121,102

121,447

8,037

129,484

-3.6

162,788

126.5

17,526

26.0

309,798

198,500

57.9

54,854

23,949

32,495

22.2

309,798

FY17

345

133,609

133,954

14,872

148,826

14.9

304,510

87.1

29,058

65.8

482,394

325,163

63.8

54,272

54,251

48,707

49.9

482,394

FY18

424

243,287

243,711

21,977

265,688

78.5

441,608

45.0

20,708

-28.7

728,004

514,984

58.4

56,326

57,402

99,293

103.9

728,004

FY19

424

253,732

254,156

18,430

272,586

2.6

559,867

26.8

23,808

15.0

856,261

645,325

25.3

59,395

57,510

94,032

-5.3

856,261

FY20

451

286,835

287,286

18,430

305,716

12.2

419,562

-25.1

23,808

0.0

749,086

548,231

-15.0

11,391

57,935

131,529

39.9

749,086

FY21E

451

297,037

297,488

18,430

315,918

3.3

451,794

7.7

39,097

64.2

806,809

548,231

0.0

11,391

63,729

183,459

39.5

806,809

(INR Mn)

FY22E

474

326,579

327,054

18,430

345,483

9.4

500,451

10.8

55,151

41.1

901,085

599,194

9.3

11,391

70,739

219,762

19.8

901,085

28 June 2020

Piramal Enterprises

Financials and valuations

Profitability Ratios (%)

EBITDA Margin - IT

EBITDA Margin - Pharma

Core ROE

ROE

Valuations

Book Value (INR)

BV Growth (%)

Price-BV (x)

EPS (INR)

EPS Growth (%)

Price-Earnings (x)

DPS (INR)

Dividend Yield (%)

E: MOFSL Estimates

FY16

19.7

9.4

5.5

7.5

704

1.0

-68.3

FY17

17.5

15.5

9.8

776

10.3

38.4

FY18

13.9

18.5

8.2

1,148

47.9

0.7

FY19

17.0

20.5

5.9

1,198

4.3

-5.2

FY20

26.5

-2.0

1,274

6.4

1.1

-25

N.A

1.0

FY21E

25.0

5.4

1,319

3.6

1.0

N.A

19.3

1.8

FY22E

25.0

5.9

1,379

4.6

1.0

12.5

17.2

2.0

28 June 2020

Piramal Enterprises

NOTES

28 June 2020

Piramal Enterprises

Explanation of Investment Rating

Investment Rating

Expected return (over 12-month)

BUY

>=15%

SELL

< - 10%

NEUTRAL

< - 10 % to 15%

UNDER REVIEW

Rating may undergo a change

NOT RATED

We have forward looking estimates for the stock but we refrain from assigning recommendation

*In case the recommendation given by the Research Analyst is inconsistent with the investment rating legend for a continuous period of 30 days, the Research Analyst shall within

following 30 days take appropriate measures to make the recommendation consistent with the investment rating legend.

Disclosures

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Motilal Oswal Financial Services Ltd. (MOFSL) is a SEBI Registered Research Analyst having registration no. INH000000412. MOFSL, the Research Entity (RE) as defined in the

Regulations, is engaged in the business of providing Stock broking services, Investment Advisory Services, Depository participant services & distribution of various financial

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specific recommendations made by the analyst(s), as the recommendations made by the analyst(s) are completely independent of the views of the associates of MOFSL even

though there might exist an inherent conflict of interest in some of the stocks mentioned in the research report

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Research Analyst views on Subject Company may vary based on Fundamental

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from MOFSL research activity and therefore it can have an independent view with regards to Subject Company for which Research Team have expressed their views.

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This report is not directed or intended for distribution to or use by any person or entity resident in a state, country or any jurisdiction, where such distribution, publication, availability

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to which this document relates is only available to professional investor and will be engaged only with professional investors.” Nothing here is an offer or solicitation of these

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located in Hong Kong & are not conducting Research Analysis in Hong Kong.

For U.S.

Motilal Oswal Financial Services Limited (MOFSL) is not a registered broker - dealer under the U.S. Securities Exchange Act of 1934, as amended (the"1934 act") and under

applicable state laws in the United States. In addition MOFSL is not a registered investment adviser under the U.S. Investment Advisers Act of 1940, as amended (the "Advisers

Act" and together with the 1934 Act, the "Acts), and under applicable state laws in the United States. Accordingly, in the absence of specific exemption under the Acts, any

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"major institutional investors"). This document must not be acted on or relied on by persons who are not major institutional investors. Any investment or investment activity to which

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The Research Analysts contributing to the report may not be registered /qualified as research analyst with FINRA. Such research analyst may not be associated persons of the U.S.

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In Singapore, this report is being distributed by Motilal Oswal Capital Markets Singapore Pte Ltd (“MOCMSPL”) (Co.Reg. NO. 201129401Z) which is a holder of a capital markets

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Specific Disclosures

1 MOFSL, Research Analyst and/or his relatives does not have financial interest in the subject company, as they do not have equity holdings in the subject company.

2 MOFSL, Research Analyst and/or his relatives do not have actual/beneficial ownership of 1% or more securities in the subject company

3 MOFSL, Research Analyst and/or his relatives have not received compensation/other benefits from the subject company in the past 12 months

4 MOFSL, Research Analyst and/or his relatives do not have material conflict of interest in the subject company at the time of publication of research report

5 Research Analyst has not served as director/officer/employee in the subject company

6 MOFSL has not acted as a manager or co-manager of public offering of securities of the subject company in past 12 months

7 MOFSL has not received compensation for investment banking/ merchant banking/brokerage services from the subject company in the past 12 months

8 MOFSL has not received compensation for other than investment banking/merchant banking/brokerage services from the subject company in the past 12 months

9 MOFSL has not received any compensation or other benefits from third party in connection with the research report

10 MOFSL has not engaged in market making activity for the subject company

28 June 2020

Piramal Enterprises

********************************************************************************************************************************

The associates of MOFSL may have:

- financial interest in the subject company

- actual/beneficial ownership of 1% or more securities in the subject company

- received compensation/other benefits from the subject company in the past 12 months

- other potential conflict of interests with respect to any recommendation and other related information and opinions.; however the same shall have no bearing whatsoever on the

specific recommendations made by the analyst(s), as the recommendations made by the analyst(s) are completely independent of the views of the associates of MOFSL even

though there might exist an inherent conflict of interest in some of the stocks mentioned in the research report.

- acted as a manager or co-manager of public offering of securities of the subject company in past 12 months

- be engaged in any other transaction involving such securities and earn brokerage or other compensation or act as a market maker in the financial instruments of the

company(ies) discussed herein or act as an advisor or lender/borrower to such company(ies)

- received compensation from the subject company in the past 12 months for investment banking / merchant banking / brokerage services or from other than said services.

The associates of MOFSL has not received any compensation or other benefits from third party in connection with the research report

Above disclosures include beneficial holdings lying in demat account of MOFSL which are opened for proprietary investments only. While calculating beneficial holdings, It does not

consider demat accounts which are opened in name of MOFSL for other purposes (i.e holding client securities, collaterals, error trades etc.). MOFSL also earns DP income from

clients which are not considered in above disclosures.

Analyst Certification

The views expressed in this research report accurately reflect the personal views of the analyst(s) about the subject securities or issues, and no part of the compensation of the

research analyst(s) was, is, or will be directly or indirectly related to the specific recommendations and views expressed by research analyst(s) in this report.

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may not be altered in any way, transmitted to, copied or distributed, in part or in whole, to any other person or to the media or reproduced in any form, without prior written consent

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customers by virtue of their receiving this report.

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The report and information contained herein is strictly confidential and meant solely for the selected recipient and may not be altered in any way, transmitted to, copied or

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the information and opinions contained in this document. The Disclosures of Interest Statement incorporated in this document is provided solely to enhance the transparency and

should not be treated as endorsement of the views expressed in the report. This information is subject to change without any prior notice. The Company reserves the right to make

modifications and alternations to this statement as may be required from time to time without any prior approval. MOFSL, its associates, their directors and the employees may from

time to time, effect or have effected an own account transaction in, or deal as principal or agent in or for the securities mentioned in this document. They may perform or seek to

perform investment banking or other services for, or solicit investment banking or other business from, any company referred to in this report. Each of these entities functions as a

separate, distinct and independent of each other. The recipient should take this into account before interpreting the document. This report has been prepared on the basis of

information that is already available in publicly accessible media or developed through analysis of MOFSL. The views expressed are those of the analyst, and the Company may or

may not subscribe to all the views expressed therein. This document is being supplied to you solely for your information and may not be reproduced, redistributed or passed on,

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accessing this information due to any errors and delays.

Registered Office Address: Motilal Oswal Tower, Rahimtullah Sayani Road, Opposite Parel ST Depot, Prabhadevi, Mumbai-400025; Tel No.: 022 71934200/ 022-71934263;

Website

www.motilaloswal.com.CIN

no.: L67190MH2005PLC153397.Correspondence Office Address: Palm Spring Centre, 2nd Floor, Palm Court Complex, New Link Road,

Malad(West), Mumbai- 400 064. Tel No: 022 7188 1000.

Registration Nos.: Motilal Oswal Financial Services Limited (MOFSL)*: INZ000158836(BSE/NSE/MCX/NCDEX); CDSL and NSDL: IN-DP-16-2015; Research Analyst:

INH000000412. AMFI: ARN - 146822; Investment Adviser: INA000007100; Insurance Corporate Agent: CA0579;PMS:INP000006712. Motilal Oswal Asset Management Company

Ltd. (MOAMC): PMS (Registration No.: INP000000670); PMS and Mutual Funds are offered through MOAMC which is group company of MOFSL. Motilal Oswal Wealth

Management Ltd. (MOWML): PMS (Registration No.: INP000004409) is offered through MOWML, which is a group company of MOFSL. Motilal Oswal Financial Services Limited is

a distributor of Mutual Funds, PMS, Fixed Deposit, Bond, NCDs,Insurance Products and IPOs.Real Estate is offered through Motilal Oswal Real Estate Investment Advisors II Pvt.

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Research & Advisory services is backed by proper research. Please read the Risk Disclosure Document prescribed by the Stock Exchanges carefully before investing. There is no

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* MOSL has been amalgamated with Motilal Oswal Financial Services Limited (MOFSL) w.e.f August 21, 2018 pursuant to order dated July 30, 2018 issued by Hon'ble National

Company Law Tribunal, Mumbai Bench.

28 June 2020