Citi has retained a sell rating on Piramal Enterprises while raising its target price to ₹950, citing cautious commentary from the management and a mixed quality of earnings in Q1FY26. The stock last closed at ₹1,002.90.
The company’s net earnings came in at ₹2.76 billion—significantly ahead of Citi’s estimate of ₹2 billion—driven by lower credit costs and a ₹900 million contribution from associate income. Additionally, a refinement in the Expected Credit Loss (ECL) model helped release ₹1 billion in provisioning, compared to a ₹450 million hit in the previous quarter, providing a temporary earnings boost.
Despite the headline beat, Citi flagged underlying stress in the retail loan book, particularly in the MSME unsecured and used car finance segments. Retail gross Stage 3 and Stage 2 assets rose to 1.8% and 2.0%, respectively, from 1.6% and 1.9% in the previous quarter. While secured lending continues to behave in a stable manner, the performance of self-employed borrowers remains a concern.
The impact from Piramal’s legacy wholesale lending book also moderated during the quarter, with minimal rundown of ₹6 billion in legacy AUM. This helped curtail the earnings drag, as losses narrowed to ₹310 million versus ₹3.29 billion in the March quarter.
Growth businesses recorded a pre-tax return on assets (RoA) of 1.5%, slightly below 1.8% in the prior quarter. For FY26, the management has guided for 25% AUM growth, led by over 30% retail AUM expansion. The company also expects to reduce its legacy AUM to ₹30–35 billion and post a profit after tax of ₹13–15 billion for the full year.
Disclaimer: This article is based on Citi’s equity research report. The views and target price mentioned are those of the brokerage firm and do not constitute investment advice.
