Motilal Oswal Retains ‘Neutral’ Stance on Piramal Enterprises Post Q1 Results
Piramal Enterprises Ltd. has reported a healthy operational performance during the quarter, led by strong growth in its retail loans and continued scale down of the legacy wholesale book, which now accounts for just ~7% of total AUM.
Asset quality remained broadly stable across key product segments (except MSME and used cars). Credit costs in the growth portfolio declined sequentially, while improving branch and employee productivity resulted in better opex ratios.
With rising retail traction and a better funding mix, net interest margin expanded further, reinforcing the shift toward a more stable and profitable lending model.
Key Takeaways from Piramal Enterprises Q1 Results
- Strong growth in retail loans
- Continued scale down of legacy wholesale book
- Broadly stable asset quality
- Improved branch and employee productivity
- Net interest margin expansion
Why Motilal Oswal Retained its ‘Neutral’ Stance
Motilal Oswal has retained its ‘neutral’ stance on Piramal Enterprises due to the company’s modest return metrics. The brokerage firm estimates return on assets (RoA) and return on equity (RoE) at 1.9% and 8%, respectively, for FY27.
However, the brokerage firm expects greater earnings stability and an improved outlook going forward. The target price for Piramal Enterprises has been revised to Rs 1,315, premised on Mar’27E SOTP.
What’s Next for Piramal Enterprises?
Piramal Enterprises expects RoA improvement to be driven by benefits in opex ratios and improvement in fee income. Additionally, further improvement in margins is likely to come from increasing the share of unsecured loans at the appropriate time and realizing benefits from a decline in the cost of borrowings.
The company’s AIF exposures, deferred consideration of $120 million from the sale of Piramal Imaging, and zero tax outgo in the foreseeable future are expected to contribute to the earnings growth.
However, the uncertainty surrounding the monetization timing of the stake in Shriram Life and General Insurance has not been factored into the estimates yet.
Conclusion
Motilal Oswal’s retention of its ‘neutral’ stance on Piramal Enterprises is based on the company’s modest return metrics. However, the brokerage firm expects greater earnings stability and an improved outlook going forward. The target price for Piramal Enterprises has been revised to Rs 1,315.