Piramal Enterprises, a prominent non-banking financial company (NBFC), reported stellar Q2 FY25 results with net profit tripling to ₹163 crore. However, despite the profit surge, the company flagged concerns over a challenging credit environment and rising non-performing assets (NPAs), raising questions about its future performance.
Q2 FY25 Financial Performance Overview
Piramal Enterprises’ core net interest income rose 17% YoY to ₹881 crore in Q2 FY25. The company also reported strong recoveries of ₹181 crore from its alternate investment fund, which helped boost other income by 56% to ₹257 crore.
However, rising gross non-performing assets (NPAs) remain a concern. The gross NPA ratio increased to 3.1%, up from 2.7% in the same period last year. Managing Director Jairam Sridharan warned of a precarious credit environment and the potential for further asset quality deterioration, especially in retail loans.
Key Financial Highlights of Piramal Enterprises Q2 FY25
| Financial Metric | Q2 FY25 | Q2 FY24 | YoY Change |
|---|---|---|---|
| Net Profit | ₹163 cr | ₹48 cr | +239% |
| Net Interest Income | ₹881 cr | ₹753 cr | +17% |
| Other Income | ₹257 cr | ₹165 cr | +56% |
| Gross NPA | 3.1% | 2.7% | +40 bps |
Challenges Ahead: The Tricky Credit Environment
Despite the strong financial results, Piramal Enterprises is facing several headwinds:
- Rising NPAs: The increase in gross NPAs, particularly in retail loans, is concerning. The company attributes much of the asset quality deterioration to over-leveraged borrowers with multiple loans from various lenders.
- Precarious Credit Environment: Sridharan highlighted that speculative borrowing for stock market investments has become an issue, further complicating the lending environment.
Future Outlook: What to Watch For
While Piramal Enterprises posted a solid financial performance in Q2 FY25, the company’s future growth may be constrained by several factors:
- Loan Loss Provisions: Piramal’s loan loss provisions increased by 60% in the quarter, reflecting a more cautious approach to lending.
- Asset Quality Concerns: The management expects continued stress in the microlending segment, which could worsen in the coming quarters.
However, the company remains optimistic about maintaining operational efficiency and reducing digital loan exposure, which has been a significant contributor to the recent stress.
Analyst Views and Stock Performance
Piramal Enterprises’ share price gained nearly 2% after the Q2 results were announced, closing at ₹1,044.95 on the BSE. Analysts are cautiously optimistic about the company’s growth trajectory but advise investors to keep an eye on rising NPAs and the challenging credit environment.
Should You Buy Piramal Enterprises Stock?
Piramal Enterprises’ Q2 FY25 results demonstrate its ability to generate strong income and manage recoveries effectively. However, the company’s rising NPAs and the precarious credit environment make it a somewhat risky bet for investors.
For those with a higher risk appetite, the stock could offer significant upside, especially if the company can successfully navigate the credit challenges ahead.
Disclaimer
This analysis is based on the latest market data and financial performance of Piramal Enterprises. Investors should seek professional financial advice before making any investment decisions.