The Piramal Group, led by Ajay Piramal, is one of India’s leading business conglomerates with a global footprint. With operations in 30 countries and brand presence in over 100 countries, the Group’s turnover is ~$2 billion in FY2020. The Group’s diversified portfolio includes a presence in industries like healthcare, financial services, glass packaging, and real estate. Driven by its core values, the Group steadfastly pursues inclusive growth, while adhering to ethical and value-driven practices. Piramal Foundation (a Section 8 Company), the Group’s philanthropic arm, has initiatives in primary healthcare and nutrition, water, education leadership, and women empowerment across 25 states of India.

Piramal Enterprises Limited (PEL) is one of India’s leading diversified companies, with a presence in Financial Services and Pharmaceuticals. PEL’s consolidated revenues were ~US$1.7 billion in FY2020, with around ~34% of revenues generated from outside India.

The share price of Piramal Enterprises rose over 6% intraday to Rs 942 on 11th May 2020. The results were declared post market hours.

Piramal Enterprises has reported a decline in net profit in the March quarter as COVID-19 pandemic stalled economic activity and spending across the globe.

The Profit After Tax for the company stood at Rs (1703) crores as compared to Rs 455 crores in the previous quarter ended in March 2019.

The company has also recommended a dividend of Rs 14 per share and the total dividend payout on this account would be Rs 316 crores.

Key Highlights (YoY):

  • Revenue declined by 2% to Rs 3,341 crores as compared to Rs 3,409 crores
  • EBITDA declined by 93% to Rs 141.96 crores as compared to 2,020 crores
  • EBITDA and PAT margin contracted to 4% and (51)% respectively
  • Earnings per Share (EPS) stood at Rs (102.46) as compared to Rs 28.32

The last few quarters have been challenging for the Indian economy. The situation has further worsened due to the COVID-19 pandemic, with a subsequent economic recovery likely to be long-drawn. To navigate through such an environment, Piramal Enterprises have significantly strengthened and deleveraged their balance sheet through multiple initiatives to raise capital.

Segment-Wise Performance (YoY):

  • Pharmaceuticals division grew by 10% to Rs 1,623 crores as compared to Rs 1,476 crores
  • Financial Services division degrew by 11% to Rs 1,718 crores as compared to Rs 1,933 crores
  • North America business contributed 39% to Revenue
  • Europe business contributed 22% to Revenue
  • Japan business contributed 6% to Revenue
  • India business contributed 18% to Revenue
  • Rest of World business contributed 15% to Revenue

The pharma business has reported EBITDA margin at 26% with FY20 EBITDA crossing Rs 1,400 crores due to healthy growth in CDMO, Complex Hospital Generics, and India Consumer Healthcare. The India Consumer Healthcare revenues grew up 25% to Rs 418 crores. However, for the Financial Services business, the loan book stands at Rs 50,963 crores with the top 10 exposures down by Rs 4,200 crores while the Housing Finance loan book is at Rs 5,534 crores. The company had raised Rs 13,500 crores in long term borrowings over the last one year. The overall provisioning is at 2.5x of GNPAs and 5.8% of the overall loan book and the Capital Adequacy Ratio of the Financial Services business at 31% as compared to 22% in the previous quarter ended in March 2019.

As of 31st March 2020, Piramal Enterprises has a total loan book of Rs 50,963 crores. Out of this, 70% is for Wholesale Real Estate, 15% for Corporate Lending, 11% for Retail Financing, and 4% for Hospitality.

Performance of Loan Book and Provisioning (QoQ):

  • A large part of the portfolio is standard (97.6%)
  • Total provisions of Rs 2,016 crores added in Q4FY20, including Rs 1,903 crores of conservative provisioning and the provisioning for change in GNPAs.
  • Provisions as a % of GNPAs at 246% as compared to 100%
  • Provisions as a % of loans at 5.8% as compared to 1.8%

Mr. Ajay Piramal, Chairman, Piramal Enterprises Ltd. said that "Our Pharma business continues to be operational despite COVID 19 lockdowns and has delivered healthy revenue growth of 13% YoY to Rs 5,419 crores and an EBITDA margin of 26% for FY20. We have consciously shrunk our wholesale loan book by 12% and more importantly, reduced our large single borrower exposure by Rs 4,200 crores over the past year."

Further, given the uncertain macro environment, we have created Rs 1,903 crores of additional provision to mitigate potential contingencies in our Financial Services business. 

Management Concall:

  • All our pharma sites remained operational during the lockdown
  • The company has made higher provisions of Rs 2,963 crores which are 5.8% of the book as compared to ~2% due to COVID-19 pandemic
  • The management expects no construction activity in June quarter. Although some activity has started, normalcy may not come in the next 2 quarters
  • The Pharma business capital raise is on track and at the appropriate time plan to reduce stake in Shriram group.
  • 60% exposure to bank loans and the management has sought moratorium
  • Net debt to equity stands at 1.2x due to a reduction in debt of Rs 17,800 crores on a YoY basis
  • The company has raised Rs 13,500 crore of long term debt in Financial Services business
  • For FY20 equity stands at Rs 30,572 crores up by 12%, Gross debt stands at Rs 42,055 crores down by 25% and Net debt stands at Rs 37,283 crores down by 32% on a YoY basis.
  • Net Interest Margin (NIM) is 5.2%, Return on Assets (ROA) is 0.5%, and Return on Equity (ROE) is 1.9% for full year

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