 "Piramal Enterprises posts Rs 2,378 crore loss on AIF provisions in Q3")
Piramal Enterprises (PEL) reported a consolidated loss of Rs 2,378 crore for the third quarter (Q3) ended December 2023, primarily due to provisions of Rs 3,540 crore for exposure to alternative investment funds (AIFs). In the same quarter of the previous financial year, it had posted a net profit of Rs 3,545 crore.
Ajay Piramal, chairman of PEL, stated in response to the Reserve Bank of India (RBI) circular issued in December 2023 that the company has made complete provisions for its investments in AIFs, subsequently removing them from its assets under management (AUM).
“Our confidence in the full recovery of these investments remains strong, which is evident in the positive payment record thus far,” said Piramal.
The company’s stock closed 1.14 per cent higher at Rs 883.55 per share on the BSE.
Its net interest income declined by 19 per cent year-on-year (Y-o-Y) to Rs 835 crore in Q3 of 2023-24 (FY24) from Rs 1,033 crore in the same quarter a year ago. However, the net interest margins improved by over 100 basis points (bps) to 4.9 per cent over the same quarter last year, said Jairam Sridharan, managing director of Piramal Capital and Housing Finance, in a media interaction after the Q3 results announcement.
The other income, comprising fees and commission, dividends, etc, was down by 71 per cent to Rs 251 crore in Q3FY24 from Rs 861 crore a year ago. The growing retail loan business has contributed to fees, said Sridharan.
Its AUM grew by 9 per cent Y-o-Y, excluding the impact of AIF provision-related reduction at quarter-end. They stood at Rs 67,283 crore at the end of December 2023. Any further investments in AIF will be severely curtailed, in line with the intent of the regulator (Reserve Bank of India).
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The assets in AIFs are performing well, and recoveries from them would add to the bottom line, said Yesh Nadkarni, chief executive officer of wholesale lending at PEL.
The legacy AUM, also known as the old business, was down 47 per cent Y-o-Y to Rs 18,693 crore. It comprised 28 per cent of total AUM and is expected to continue to run down further. Growth AUM grew by 63 per cent Y-o-Y to Rs 48,590 crore at the end of December.
The finance company has slowed down business in the small-ticket unsecured consumer loan segment, and interest rates have been repriced by 25-100 bps in this category, said Sridharan.
RBI has increased the risk weight on unsecured credit to contain the high pace of credit expansion in this segment.
Its capital adequacy stood at 24.3 per cent on a consolidated basis at the end of December 2023. While the AIF provision impacted capital adequacy by 400 bps, the sale of Rs 1,440 crore from Shriram Investments would further strengthen the balance and capital adequacy, added Sridharan.