MOSL: PIRAMAL ENTERPRISES (Buy)-Strong quarter-rapid scale-up of retail housing finance segment

Piramal Enterprises: Strong quarter; rapid scale-up of retail housing finance segment

(PIEL IN, Mkt Cap USD7.6b, CMP INR2766, TP INR3500, 26% Upside, Buy)

• Piramal Enterprises’ (PIEL) 3QFY18 consolidated PAT grew 21% YoY to INR4.9b, driven by strong growth in financial services business. While PBT grew 50% YoY normalization of tax rate (33% in 3QFY18 vs 17% a year ago) led to 23% YoY growth in reported PAT.
• Lending business exhibited a strong performance – loan book grew 67% YoY to INR380b, helped by 53% YoY growth in the real estate (RE) lending book. The share of RE lending in overall loans declined to 80% vs 88% a year ago. The share of mezzanine finance declined sequentially from 29% to 24% (35% a year ago). Additionally, the housing book has scaled up well to ~INR5b over the past four months. The company has approved undisbursed sanctions of INR236b in lending business (62% of outstanding loans).
• Corporate finance book grew 2.6x YoY to INR70b. Around 9% of this book is toward emerging corporates, where the ticket size is in the range of INR100m-INR1b. Overall, RoA/RoE for the lending business for 9MFY17 was 4.1%/21%, while the GNPL ratio was 0.4% v/s 0.2% in 2QFY18.
• Pharma segment posted moderate growth of 7% YoY to INR10.2b, primarily due to moderate growth of 6% YoY in the global pharma business. The domestic pharma business grew 17% YoY.