MOSL: PIRAMAL ENTERPRISES (Buy)-Final piece of the jigsaw in place-Completes its real estate lending product suite with launch of HFC arm
Piramal Enterprises: Final piece of the jigsaw in place; Completes its real estate lending product suite with launch of HFC arm
(PIEL IN, Mkt Cap USD6.9b, CMP INR2612, TP INR3266, 25% Upside, Buy)
Piramal Enterprises (PIEL) hosted a conference call to discuss the launch of its housing finance business. The call revolved around the strategy, competitive positioning and outlook for this segment.
Post the receipt of the HFC license in the first week of September, PIEL is off to a good start, driven by its ‘B2B2C’ strategy, i.e. reaching out to home buyers in projects funded by PIEL. It has already on-boarded 15 developers, 500 connectors and 50 DSAs, building AUM of INR2b.
While this was anticipated, PIEL has finally added the last piece of the ‘real-estate jigsaw’ – its product suite now ranges from pure equity for land purchase by the developer to home loan for end-home buyer. We had already factored in some contribution from retail home loans over the next 2-3 years. Reiterate Buy with a target price of INR3,266.
Migrating to Tier I, II and III locations with a hub-and-spoke model
The company is deploying a hub-and-spoke model for its sourcing and underwriting business. Over the next three years, management plans to open 24 branches, with a 50:50 split between Tier I and Tier II/III cities. While the split of branches will be equal, we expect AUM to be skewed toward Tier I locations, as a) the company has existing builder loan projects at Tier I locations and b) volumes and ticket sizes are expected to be higher. PIEL has opened one branch by now (in Mumbai), and would open another one in Thane (outskirts of Mumbai) shortly. In the initial stages, it will enter more of Tier I markets and then move on to Tier II/III markets. PIEL will cater to the affordable housing segment too – management is confident that affordable housing supply will pick up in a big way (after 12 months or so), as most of the Top 10 developers in the large cities are seriously looking at this segment. Land prices in the outskirts of some cities have declined too, strengthening the affordable housing push.
Piramal Enterprises is a pharmaceutical group based in India. Co. is engaged in the production, packaging, marketing, sale, import, and export of pharmaceutical products in the form of tablets, capsules, liquids, powders, creams, ointments, granules and bulk drug. Co. is engaged in the manufacture of glass containers. Co.'s brands include Phensedyl, Haemaccel, Stemetil, Paraxin, Phenergan, Gardenal, Pentids, Tixylix, Supradyn and Tenormin. Co. maintains over 295 issued patents plus 808 pending patent applications, spread across categories such as compositions of matter, methods of treatments, biomarkers, diagnostics, pharmaceutical compositions and drug delivery systems.
Motilal Oswal Financial Services Ltd. is a reputed name in Financial Services and Online Trading with group companies providing services such as Private Wealth Management, Retail Broking and Distribution, Institutional Broking, Asset Management, Investment Banking, Private Equity, Commodity Broking, Currency Broking, Principal Strategies & Home Finance.
Motilal Oswal Securities is a group company of Motilal Oswal Financial Service Limited which started as a stock trading company and has blossomed into well diversified firm offering a range of financial products and services. Motilal Oswal has built a reputation as the source for best stock trading company and this has taken a wealth of experience, knowledge and expertise, constantly working in tandem, over the years.
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