Piramal Enterprises tanks 7% as loss widens in second quarter: Buy, Sell or Hold? Brokerage recommends THIS

Stocks of Piramal Enterprises Ltd, NSE: PEL, crashed by Rs 58.25 or around 7 per cent apiece to trade at 830.60 at the National Stock Exchange (NSE) on Thursday as the company's loss in the July-September quarter widened. The company reported a net loss of Rs 1,536 crore in the second quarter of the current financial year. Share of Piramal Enterprises, the financial services arm of the Piramal group, had settled at Rs 888.85 apiece in the last trading session on Wednesday.

Brokerage firm CLSA has downgraded its rating on Primal Enterprises to 'Underperform' from 'Buy' and has also reduced the target to Rs 900. Earlier, the target set by the brokerage firm was Rs 1170.

CLSA said that the worst may be over for the company but it may still be difficult for investors to believe.

However, Zee Business Editor Anil Singhvi suggested that investors should buy if there is any big cut. 

"The right time to buy Piramal is when there is bad news or panic and today is the day," Singhvi added.

The 52-weak high and low of the share are Rs 2,863.45 and Rs 786.15. The scrip hit an all-time high of Rs 3,307.95 on August 31, 2018 and an all-time low of Rs 606.85 on March 24, 2020.

It is to be noted that the quarterly report includes the numbers of Dewan Housing Finance Corporation (DHFL) which it had acquired in September 2021 through the insolvency process. Piramal Enterprises said the numbers are not comparable as this is the first time that the company, whose credit business was 90 per cent dominated by wholesale lending earlier, is reporting the earnings as a Reserve Bank-regulated non-banking lender, and also after the merger of DHFL.

Net interest income rose 34 per cent to Rs 934 crore and other income rose over 130 per cent to Rs 63 crore, taking total income 37 per cent higher to Rs 997 crore.

Jairam Sridharan, managing director of Piramal Capital & Housing Finance, said net loss shot up to Rs 1,536 crore for the quarter -- nearly five-times more than what it had reported in the year-ago quarter at Rs 395 crore -- primarily due to re-computing after the merger of DHFL and the demerger of Piramal Pharma.

He said the combined entity has seen improved performance across most parameters, led by a massive spike in the retail book that now constitutes 43 per cent of the Asset Under Management (AUM), as retail disbursements rose 8 times to Rs 3,973 crore.

Sridharan told PTI that net loss widened as the company had taken a hit of Rs 3,311 crore due to the merger of DHFL and moved Rs 5,888 crore of wholesale assets from stage 1 to stage 2. Of the Rs 3,311 crore hit, Rs 1,000 crore are for doubtful investments and the rest are for loan provisions for the stage 2 accounts, he said.

Another reason for the massive jump in losses is the steep 158 per cent jump in expenses to Rs 541 crore from Rs 209 crore. The management did not offer any reason for this.

The losses would have been much higher had it not held back Rs 694 crore in deferred taxes as against Rs 98 crore payments in the year-ago period.

Yesh Nadkarni, chief executive, wholesale lending, at Piramal Capital, said the total AUM rose 35 per cent to Rs 63,780 crore, led by 12 per cent jump in retail loans to Rs 24,872 crore, while wholesale book declined by 13 per cent during the quarter to Rs 38,908 crore, helping the firm close the quarter with a revenue growth of 37 per cent at Rs 997 crore and increasing the share of the retail book to 43 per cent of the total book.

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With PTI inputs