Piramal Enterprises stock slips over 6% post Q4 numbers, Motilal Oswal cuts rating to ’Neutral’
Piramal Enterprises saw a 6.15% decline in shares during intraday trade to ₹839 apiece after releasing Q4 results. Company reported a net profit of ₹137 crore for the quarter, attributed to write-backs on taxation and investments. Board approved merger with Piramal Capital & Housing Finance.
Piramal Enterprises, a prominent diversified non-banking financial company (NBFC), experienced a 6.15% decline in its shares during today's intraday trade, reaching ₹839 apiece. This drop followed the company's release of its Q4 FY24 and full fiscal FY24 financial figures. The decline witnessed today has resulted in the stock losing 10.4% of its value over the course of this week.
On Wednesday, the company reported a consolidated net profit of ₹137 crore for the March quarter, a significant improvement from the ₹196 crore loss in the corresponding period last year. This improvement was attributed to write-backs on taxation and investments in alternative investment funds.
Interest income for the reporting quarter remained steady at ₹1,944 crore compared to the preceding quarter and increased by 1% year-on-year (YoY). However, net interest income fell by 18% YoY to ₹755 crore from ₹917 crore in Q4 FY23, with a 10% decrease on a quarter-on-quarter (QoQ) basis.
Non-interest income rose by 28% to ₹323 crore for the reporting quarter, primarily due to increased dividend income. Operating expenses increased by 13% QoQ and 17% YoY to ₹785 crore.
For the full fiscal year, the company reported a loss of ₹1,683 crore for 2023–24, compared to a profit of ₹9,969 crore in the previous year. Net interest income for FY24 dropped by 20% to ₹3,022 crore, compared to ₹3,757 crore reported in FY23. Operating expenses increased to ₹2,774 crore from ₹2,215 crore in FY23, representing a 25% YoY growth.
Meanwhile, the Board of Directors approved a composite scheme of arrangement for the merger of Piramal Enterprises Limited (PEL) with its 100% subsidiary Piramal Capital & Housing Finance Limited (PCHFL).
Following the merger, PCHFL will be renamed Piramal Finance Limited (PFL). As part of the merger consideration, PEL shareholders will receive one equity share of PFL for every one equity share of PEL, along with one NCRPS (non-convertible non-cumulative non-participating redeemable preference share) of ₹67 of PFL, subject to RBI approval, the company said in its earnings report.
Ajay Piramal, Chairman, Piramal Enterprises Ltd, said, "Over the past two to three years, our company has undergone a significant transformation, reshaping both its business operations and long-term strategy. This transformation gained further momentum in FY24. Specifically, our growth business, which includes retail lending and wholesale 2.0, witnessed substantial expansion during this period.
"We made progress across key areas, including AUM growth, business mix optimisation, and moderation in Op-Ex ratios. In this quarter, there was a meaningful reduction in our legacy business, AUM, and this process should largely conclude in the current year. This acceleration has been associated with some credit costs. However, profit in our growth business and other gains in the P&L have supported the profitability in 4QFY24."
"We remain focused on optimising operating leverage in the growth business and reducing the contribution of the legacy business as quickly as possible. Having navigated through this transformative journey, we are encouraged by the strengthening performance of our new businesses. We are optimistic that the lingering effects of our legacy challenges should largely fade away this year," he added.
Rating downgrade
Following the company's Q4 and FY24 performance, domestic brokerage firm Motilal Oswal downgraded the rating on the stock to 'Neutral' with a revised target price of ₹925 apiece.
"Pockets of opportunity, which we earlier thought would be utilised for some inorganic acquisition in retail businesses or for strengthening the balance sheet, are being utilised to rundown the stressed legacy AUM. We do not see catalysts for any meaningful improvement in the core earnings trajectory of the company," said Motilal Oswal.
Disclaimer: The views and recommendations given in this article are those of individual analysts. These do not represent the views of Mint. We advise investors to check with certified experts before making any investment decisions.
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