RESULTS RECKONER

Quarter ended Sep 30, 2019; common sample of 103 companies (results available of 113)

WEAK DEMAND MAY KEEP STEEL SECTOR Q2 MUTED

Piramal Enterprises has posted 29 per cent growth in its profit before tax (PBT) at ~733 crore in the quarter ended September of FY20 (Q2FY20), compared to ~570 core in the same period of the last financial year. The net profit of the company was up 18 per cent at ~569 crore in Q2FY20, compared to ~480 crore in Q2FY19 on account of good growth in total income driven by pharma and other businesses and lower operating expenses.

The revenue of the company saw an increase of by 15 per cent to ~3,604 crores for Q2FY20, compared to ~3,144 crore in Q2FY19. The shares of Piramal Enterprises closed at ~1,556.35, up 6 per cent, on the BSE. As far as the financial services arm of the firm is concerned, the loan book of the company stood at ~53,055 crore in the quarter ended September FY20, with retail portfolio at ~6,393 crore constituting 12 per cent of the entire loan book from 4 per cent in the same period last financial year. The developer portfolio constituted 48 per cent of the loan book, which was earlier 66 per cent of the loan book.

The company has disbursed ~3,100 crore worth of loans In Q2FY20, down 35 per cent sequentially. It had disbursed ~4,800 crore worth of loans in Q1FY20.

The net interest margin (NIM) of the firm stood at 5.4 per cent. Its average cost of borrowing stood at 11 per cent for H1FY20, while average yield on loans stood at 14 per cent. The debt to equity of the company is 2.9x.

Amid challenging business environment, PEL’S loan book shrunk sequentially from ~56,605 crore in June 2019 to ~53,055 crore at the end of September 2019. This was the second successive quarter in which the company saw a contraction in outstanding loans. Its loan book was ~56,624 crore in March 2019.

The asset quality of the company may turn bad as India Ratings in its NBFC outlook had said that wholesale NBFCS which have huge exposure to real estate developers could see their asset quality slide as early as the second half of FY20 if refinancing pressure continues. Most NBFCS, with huge real estate exposure, have given a moratorium of 18-24 months on the principal amount lent in the last two years which will end towards the second half of FY 20 and the first half of FY21.

Asset quality under pressure in Q2; loan book shrinks for second quarter in a row