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Conference Call Overview • Date: May 14, 2024 • Purpose: Discuss audited financial results for FY ending March 31, 2024 • Key Executives: Ajay Piramal (Chairman), Upma Goel (CFO), Ravi Singh (Head of Investor Relations) • Regulatory Compliance: Communication directed to BSE and NSE
Corporate Reorganization • Merger of Piramal Enterprises Limited (PEL) with Piramal Capital and Housing Finance Limited (PCHFL) • New entity to be named Piramal Finance Limited • Aims: Simplify group structure, ensure regulatory compliance • Expected completion: 9 to 12 months • PEL shareholders to receive shares in the new entity
Financial Performance Highlights • Significant growth in FY'24: • 55% year-on-year increase in assets under management (AUM) • Retail AUM grew by 49% • Legacy business reduction: • AUM decreased from INR 18,693 crores to INR 14,572 crores in Q4 FY'24 • Loss of INR 1,351 crores in legacy segment • Future projections: • Legacy book expected to shrink to less than INR 7,000 crores by FY'25 • Anticipated 15% growth in total AUM to INR 80,000 crores in FY'25
Retail and Wholesale Lending Performance • Retail Lending: • AUM reached INR 48,927 crores, 49% growth year-on-year • Mortgages (68% of retail AUM) grew by 38% • Low delinquency ratio of 0.2% • Wholesale Lending: • AUM grew 14% quarter-on-quarter to INR 6,347 crores • Significant reduction in legacy Wholesale 1.0 business
Financial Metrics • Profit after tax for growth business in Q4: INR 204 crores • Overall loss after tax for FY'24: INR 1,684 crores • GNPA ratio: 2.4%, NNPA ratio improved to 0.8% • Capital adequacy ratio: 25.6%
Concerns and Responses • Credit cost of INR 3,354 crores raised by analysts: • Factors included fair value markdowns and one-time settlements • Legacy loan book management: • Target to reduce legacy book from INR 14,000 crores to INR 7,000 crores by FY'25 • Emphasis on managing provisions and realizing asset value
Future Outlook • Retail growth expected to slow to 26% CAGR through FY'28 • Shareholders of PEL to receive shares in Piramal Finance • Assurance of limited impact on dividend policy and net worth from the merger
Conclusion • The call concluded with an invitation for further inquiries from investors, emphasizing the company's commitment to transparency and stakeholder engagement.
Key Highlights • Date of Call: January 29, 2024 • Financial Performance: • Total AUM increased by 6% QoQ and 9% YoY, exceeding INR 70,000 crores. • Core operating profit rose to INR 316 crores. • Improved asset quality with reduced NPA ratios. • Net worth of INR 26,000 crores and capital adequacy ratio of 24.3%.
Strategic Developments • Shift to Growth Businesses: • Growth businesses now represent 72% of AUM. • Retail lending showed significant growth, with AUM up 54% YoY. • Legacy wholesale assets are being gradually reduced.
Retail Lending Insights • Performance Metrics: • Mortgage business (72% of retail AUM) saw a 23% increase in housing loan disbursements. • Loan against property (LAP) disbursements nearly doubled. • Unsecured retail segment reached an AUM of INR 10,000 crores.
• Branch Expansion: • Added 28 new branches, increasing consumer base to 3.9 million.
Wholesale Business Overview • Growth and Strategy: • 24% QoQ growth in wholesale AUM. • Focus on high-quality, granular portfolios.
Financial Performance Insights • NIM and Income: • 28 basis point NIM expansion and 11% increase in net interest income. • Operating expenses rose due to retail investments, but pre-provisioning operating profit increased.
Alternative Investment Fund (AIF) Discussion • Provisions and Recoveries: • Provision of INR 3,500 crores related to AIF investments. • Anticipated recoveries from remaining loans, with INR 1,137 crores already recovered.
Credit Costs and Provisions • Concerns Addressed: • Higher credit costs attributed to lack of bulky recoveries in wholesale business. • Adjustments in expected credit loss criteria for Stage 2 accounts.
Long-term Profitability Outlook • Future Projections: • Potential ROA of 3% to 3.25% with reduced operating expenses and increased yields. • No updates on long-term credit rating as agencies await clarity on AIF and credit costs.
Conclusion • Optimism for Growth: • Executives expressed confidence in continued growth and improving profitability aligned with strategic goals.
Submission Details • Date of submission: November 16, 2023 • Earnings call date: November 9, 2023 • Compliance with SEBI regulations
Macroeconomic Insights • Chairman Ajay Piramal discussed: • India's resilience amid global uncertainties • Strong retail credit demand • Positive outlook for loan growth despite rural economic risks
Company Performance Highlights • Total assets under management (AUM) increased by 4% QoQ to INR 66,933 crores • Retail segment growth: 55% YoY • Key metrics: • Reduction in Wholesale SRs book • Stable asset quality • Growth in net interest income and fee income • Share buyback completed: INR 1,750 crores • Strong capital position maintained
Retail Lending Segment • Overview by Jairam Sridharan: • 55% YoY growth in retail AUM • 57% increase in quarterly disbursements • Average yield on disbursements: 14.3% • Stable delinquency rate: 1.4% • High average CIBIL score: 740 • Expanded customer base: 3.6 million customers
Wholesale Lending Segment • Discussion by Yesh Nadkarni: • 45% reduction in AUM since March 2022 • Focus on resolving stressed assets • Growth in Wholesale 2.0: 48% QoQ
Financial Performance • Upma Goel reported: • 10% QoQ growth in net interest income • 39% increase in fee income • Profit after tax for Q2 FY '24: INR 48 crores (down from INR 509 crores in Q1) • Excluding one-offs, profit rose to INR 113 crores • Diversification of borrowing mix and stable costs
Credit Costs and Asset Management • Jairam Sridharan addressed: • Current net credit cost: 1.2% • Long-term expectation: around 1.5% • Derecognition of assets only when fully provided for • Organic recoveries contributing to reduction in Stage 2 and Stage 3 assets
Regulatory Discussions • Ongoing discussions with regulators regarding compliance and growth strategy • Potential need for regulatory extensions by March 2024
Customer Acquisition and Lending Trends • Slowdown in new customer acquisition attributed to decline in unsecured lending • Optimism about future credit quality and growth in unsecured segment
Conclusion • Summary of strategic priorities and confidence in continued growth and profitability expressed by Jairam Sridharan.
Piramal Enterprises Q1 FY2024 Earnings Conference Call Summary
Key Highlights • Date of Call: August 1, 2023 • Total Assets Under Management (AUM): Rs. 63,938 crores • Retail AUM: Rs. 34,890 crores (57% growth) • Wholesale AUM: Rs. 26,000 crores (38% decrease) • Buyback Announcement: Up to 1.4 crores equity shares at Rs. 1,250 each (totaling Rs. 1,750 crores)
Financial Performance • Profit After Tax: Rs. 509 crores (due to Rs. 855 crore gain from Shriram Finance stake sale) • Consolidated Net Worth: Rs. 30,844 crores • Capital Adequacy Ratio: 34.3% • Borrowing Mix: Fixed to floating rate debt ratio of 57:43 • Borrowing Cost: Reduced to 8.6%
Strategic Focus • Goodwill Write-off: Rs. 278 crores related to past real estate fund investments • Utilization of Proceeds from Shriram Sale: • Organic growth • Shareholder returns • Potential M&A opportunities
Asset Management and Recovery • Wholesale Book Reduction: Ongoing recovery efforts with no anticipated negative surprises • Stage-1 Assets: Total Rs. 18,000 crores, with adequate provisioning • Security Receipts (SRs): Marked to market quarterly, representing a small portion of overall recoveries
Investor Inquiries • Promoter Group Capital Infusion: Buyback mechanism to increase stake naturally • Competition: Monitoring developments from Jio Financial Services • Unsecured Loans: Targeting 30% of retail AUM in the medium term
Operational Insights • Core Pre-Provisioning Operating Profit (PPOP): Decline due to shift from interest-yielding to non-interest-yielding assets • Future AUM Growth: Positive outlook from retail segment growth • Credit Costs: Current net credit costs at 1.1%, targeting 1.5% to 2%
Strategic Investments • Insurance Sector: 50% stake in Pramerica Life, with plans for growth over the next five years • Delinquencies in Unsecured Loans: Manageable impact on profit and loss due to existing credit agreements
Conclusion • The call concluded with an invitation for further questions, emphasizing the company's commitment to strategic growth and recovery efforts.
Call Details • Date: May 5, 2023 • Transcript Submission: May 11, 2023 • Key Executives Present: Ajay Piramal (Chairman), Ruchika Jain (Investor Relations), Jairam Sridharan, Nischint Chawathe, Avinash Singh, Yesh Nadkarni, Bhavik Dave, Nishid Shah, Piran Engineer.
Financial Highlights • Total Assets Under Management (AUM): INR 63,989 crores • Retail AUM: Grew 49% YoY to INR 32,144 crores • Wholesale AUM: Decreased by 33% YoY • Cash Realizations from Stressed Assets: Over INR 12,500 crores • Gross Non-Performing Asset (GNPA) Ratio: Improved to 3.8% • Profit After Tax (PAT) for FY23: Increased by 5% to INR 1,902 crores • Capital Adequacy Ratio: 31% • Dividend Recommended: INR 31 per share
Strategic Focus • Retail Lending: Emphasis on secured loans, significant growth in disbursements and customer acquisition. • Wholesale Segment: Focus on resolving stressed assets and diversifying AUM. • Growth Target: Mid- to high-teens AUM growth with a focus on technology and analytics.
Key Inquiries and Responses • Future Run Rate & Funding Rates: Confirmation of potential for lower funding rates as costs decrease. • Provision Coverage for Stage 2 and 3 Assets: Assurance provided regarding adequacy despite reductions. • Yield Trends: Specific yield figures shared across loan products; retail costs expected to decrease. • Wholesale Book Concerns: Clarification on strategic differences between stressed and diversified lending segments.
Asset Management • Stage 2 and 3 Asset Classification: Clarification on the value and movement of assets. • Credit Costs: INR 300 crores for the quarter, primarily from retail and wholesale segments. • Real Estate Portfolio: Majority of wholesale portfolio under Stage 2 and 3 related to real estate projects.
Conclusion • Future Outlook: Stabilization of margins and credit costs anticipated, with ongoing management of wholesale portfolio and asset quality concerns addressed. Further inquiries welcomed.
Key Highlights • Date of Call: February 8, 2023 • Submission to BSE and NSE: February 15, 2023 • Chairman: Ajay Piramal
Financial Performance • Retail AUM Growth: 29% YoY to Rs. 27,896 crores • Wholesale AUM Decline: 20% reduction, improving retail-wholesale mix to 43% • Net Profit: Rs. 3,545 crores, aided by tax provision reversal and restructuring • Provisioning Buffer: One-time buffer of Rs. 1,073 crores for asset quality • Balance Sheet Strength: Net worth of Rs. 31,241 crores; net debt-to-equity ratio of 1.3x
Strategic Focus • Retail Lending Expansion: New branches and product launches • Digital Finance Initiatives: Launch of an innovation hub in Bengaluru • Liability Management: Average borrowing cost of 8.4%; capital adequacy ratio of 31%
Asset Management • Wholesale Book Management: 20% reduction in Wholesale 1.0 AUM; development of Wholesale 2.0 book • Stage-2 and Stage-3 Asset Management: Active management to decrease wholesale book size • Provisions for Stressed Assets: Adequate provisions for stressed wholesale exposures
Market and Investor Insights • Market Conditions: Timing of market actions contingent on conditions • Investor Concerns: Questions about financial health and transparency addressed • Future Provisions: Management reassured on significant provisions and long-term business focus
Specific Inquiries • Interest Rate Changes: 50 basis points increase on home loan portfolio; 30 basis points on new originations • Real Estate Exposure: Clarification on inherited DHFL portfolio assets • Stage-3 Asset Resolution: Ongoing efforts to resolve specific credit-impaired assets
Embedded Finance Segment • Focus: Acquiring customer relationships for cross-selling, not AUM growth • Current Partners: 22 fintech companies; ROA over 4%
Operational Insights • Operating Expenses: Higher due to retail expansion; expected gradual decrease in OPEX to assets ratio • Credit Costs: Budgeted up to 4%, actual around 1%
Conclusion • Future Guidance: To be provided in Q4; buyback suggestion acknowledged • Call Closure: Participants encouraged to reach out for further questions.