Piramal Enterprises Q2 profit triples to Rs 163 crore; flags precarious credit environment risks

MUMBAI: Non-bank lender Piramal Enterprises on Wednesday said its September quarter net profit tripled to Rs 163 crore on a low base, but flagged risks from the “precarious” credit environment. The city-headquartered entity had reported a profit of Rs 48 crore in the year-ago period, and Rs 181 crore in the preceding June quarter.
Its core net interest income was up 17 per cent to Rs 881 crore, while recoveries of Rs 181 crore from alternate investment fund investments in the first half of the fiscal helped the other income grow by 56 per cent to Rs 257 crore.
Net interest margin went up to 5.1 per cent from 4.7 per cent in the year-ago period on a shift in the loan base towards what the company defines as growth assets.
Managing Director of Piramal Capital and Housing Finance Jairam Sridharan however said that chances of a further upside are slim, and the number may narrow as well in the future.
Gross non performing assets ratio moved up to 3.1 per cent from 2.7 per cent, and Sridharan said this may be the start of a new cycle of setbacks on asset quality when it comes to retail loans, which have been stable on asset quality for over a decade and have seen handsome growth.
“The risk environment is very tricky. We need to be cautious, the environment is very precarious,” he told reporters on an earnings call.
Sridharan said 80 per cent of the loan setbacks for Piramal came from over-levered borrowers, who are having multiple borrowings from various entities.
He also called out borrowings for speculative bets on the stock markets as an area of concern but added that Piramal has not seen many setbacks because of this aspect.
Sridharan said it is very difficult to ascertain the usage of borrowings for punting on stock markets, but added that the company has devised some “tricks” to avoid the trap as part of its underwriting.
The overall loan loss provisions were up 60 per cent to Rs 317 crore during the quarter.
Sridharan said unsecured loans, which is contributing for much of the stress in the system, has not impacted the lender much, and added that for the last six quarters in a row, it has reduced digital loans.
The company is also experiencing troubles in the Rs 600-crore microlending book and the same is likely to get accentuated going ahead, the management said.
The Piramal Enterprises scrip gained 1.97 per cent on Wednesday to close at Rs 1,044.95 on BSE.