11 February 2021
3QFY21 Results Update | Sector: Financials
Equity Shares (m)
52-Week Range (INR)
1, 6, 12 Rel. Per (%)
12M Avg Val (INR M)
368.4 / 5
1676 / 608
TP: INR2,170 (+33%)
Scaling down Wholesale Lending; Pharma segment stable
Financials & Valuations (INR b)
EPS Gr. (%)
Div. Yield (%)
Shareholding pattern (%)
Dec-20 Sep-20 Dec-19
FII Includes depository receipts
Piramal Enterprises (PIEL)’s consol. PAT increased 19% YoY to INR8b. The
Financial Services (FS) segment was characterized by a run-down in the
Wholesale Lending book, the rollout of the Retail segment, and marginal
asset quality deterioration.
The Complex Hospital Generics (CHG) business was volatile due to COVID in
3QFY21. On the other hand, the Contract Dev. and Manufacturing Org.
(CDMO; led by a strong order book) / India Consumer business (led by
increased demand for Self-Care and Baby Care products) has been steady.
As the Carlyle deal commenced in Oct’20, the consol. networth jumped from
INR315b to INR355b QoQ. The equity infusion was used to primarily pare
down debt – consol. net debt/equity ratio is at a multi-year low of 0.9x.
After a lackluster 1HFY21, the Real Estate segment rebounded in 3QFY21
across most large cities. We expect the company to remain cautious in
Wholesale Lending, with incremental disbursements to be largely driven by
the Retail segment.
We forecast a 12% loan book CAGR over FY21–23E.
The company has a provision buffer of 6.3% of loans, which is largely
While the Dewan Housing Finance (DHFL) deal is value-accretive,
we await final regulatory approvals before incorporating it in our estimates.
Maintain Buy, with TP of INR2,170 (FY23E SOTP-based).
After three quarters of stable loans, the loan book declined 10% QoQ to
The GNPL ratio (proforma) increased 120bp QoQ due to the
slippage of one corporate account. Total BS provisions increased 40bp
QoQ to 6.3%. PIEL restructured 3.8% of loans in the quarter.
Cost of funds remains elevated at 10.8%, resulting in ~400bp spreads. We
believe this could improve as a) leverage in the Financial Services business is
down from 2.5x to 1.9x YoY and b) the asset quality picture is much clearer,
and total stress due to the pandemic is likely to be much lower than initially
The DHFL acquisition is another step toward BS ‘retailization’.
The total deal
consideration is INR342.5b, of which the upfront cash component is
INR147b (incl. cash on DHFL’s BS) and the deferred component (NCDs) is
PIEL launched its Retail Lending segment with six products in 3QFY21 –
Mass Housing Finance, Affordable Housing Finance, LAP, Secured Business
Financing, Digital Personal Loans, and Digital Purchase Finance (the last two
are via partnerships). Overall yield in this segment is 11.5–12%.
Pharma sales grew moderately by 5.6% YoY for 3QFY21. CDMO / India
Consumer products increased 16% YoY / 14% YoY, driving overall growth in
the Pharma segment.
This was partly offset by 13% YoY decline in the CHG segment.
FS – running down Wholesale Lending; INR343b DHFL deal
Pharma – outlook on improving track
Research Analyst: Alpesh Mehta
(Alpesh.Mehta@MotilalOswal.com);+91 22 6129 1526 |
(Piran.Engineer@MotilalOswal.com); +91 22 6129 1539
(Nitin.Aggarwal@MotilalOswal.com); +91 22 6129 1542 |
(Divya.Maheshwari@motilaloswal.com); +91 22 6129 1540
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.
28 October 2020