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On Tuesday, Jefferies analyst Bhaskar Basu revised the price target for Piramal Enterprises Group (PIEL:IN) shares to INR811 from the previous INR820, while maintaining an Underperform rating on the stock. The adjustment follows the company's third-quarter financial results, which reported a core loss of INR3.3 billion, a significant drop from the second quarter's INR0.9 billion and below Jefferies' estimated profit after tax (PAT) of INR1 billion.
The core loss was attributed to softer net interest income (NII) and higher provisions. Despite this, Piramal Enterprises saw its consolidated assets under management (AUM) grow by 16% year-over-year, driven by an increase in retail AUM. The net interest margin (NIM) remained stable quarter-over-quarter. However, provisions doubled as the company took a 30% haircut while unwinding its wholesale 1.0 AUM during the quarter.
Basu indicated that more haircuts might be expected as Piramal Enterprises continues to unwind the remaining legacy AUM. The analyst also suggested that operational expenditure moderation would occur gradually and that return on assets (ROA) and return on equity (ROE) expansion is anticipated to be more pronounced towards the end of the forecast period, with an expected ROA/ROE of less than 1.5%/6% over the fiscal years 2025 to 2027.
The report by Jefferies underlines the challenges faced by Piramal Enterprises in the unwinding of its wholesale AUM and the impact on its financial performance. The company's strategic focus on retail AUM growth and the stability of its NIM are positive indicators, but the near-term outlook remains cautious as reflected in the revised price target and the maintained Underperform rating.
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