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earnings | IST

Piramal Enterprises Q2: Loan book quality improved after writing off NPAs in DHFL, says management

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In an interview to CNBC-TV18, Ajay Piramal said that the haircut taken on DHFL retail book is a little over 25 percent. He also spoke at length about the Q2 performance and the reason for the year-on-year (YoY) dip in net sales. According to him, the quality of the loan book has now improved as all NPAs that were being provided for earlier have now been written off and the fair value of the loan book from DHFL stands at Rs 22,000 crore.

Piramal Enterprises on Thursday reported a 32.12 percent decline in consolidated net profit at Rs 426.49 crore for the quarter ended September, mainly on account of decline in sales in financial services segment and one-time expense related to transaction cost for Dewan Housing Finance Corporation (DHFL) acquisition. The company had posted a net profit of Rs 628.31 crore for the corresponding period of the previous fiscal, Piramal Enterprises said in a regulatory filing. Consolidated revenue from operations stood at Rs 3,105.52 crore for the quarter under consideration. It was Rs 3,301.84 crore for the same period a year ago.
The acquisition of DHFL and its merger with Piramal Capital & Housing Finance Limited (PCHFL) was completed in September this year, as a result of which the company’s total assets under management (AUM) has grown 42 percent QoQ to Rs 66,986 crore.
In an interview to CNBC-TV18, Ajay Piramal, Chairman, Piramal Group, said, “The loan book at the beginning of the quarter, which was there with the DHFL books, would be approximately Rs 44,000 crore, . We have now done a fair valuation because we have been very conservative in the value and taken the fair value at Rs 22,000 crore. Hence whatever loan book we have today from DHFL contains all the good loans. Whatever was the NPA, that was being provided for earlier, has now been totally written off by us. So, in that sense the quality of loan book has improved.”
Piramal said that the haircut taken on DHFL retail book is a little over 25 percent. “What you are seeing as a YoY dip is a reflection of what we had planned in our strategy. Our strategy is to bring down the wholesale book and improve the retail book and therefore, improve the ratio between wholesale and retail. So the minus growth seen is because the wholesale book has come down this year and that is part of a strategy,” he said.
On retail loans, he said, “We have increased our proportion of retail loans, which was at the beginning of the quarter at 10 percent of our overall AUMs, has now become 34 percent and that’s because the merger with DHFL has taken place.”
“Just out of abundant caution because of what is happening in the environment, about Rs 8000 crore of cash on the balance sheet at the end of the quarter, which is not yielding other than 3 percent cost. This is just because we wanted to be ready for DHFL and for the environment,” he said.
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