CLSA has maintained a ‘Hold’ rating on Piramal Enterprises while raising its target price to ₹1,200, implying an 8% downside from the current market price of ₹1,300.
The brokerage highlighted that the company reported a Q1FY26 net profit of ₹2.8 billion, excluding any Alternative Investment Fund (AIF) gains. The performance was aided by lower credit costs (annualised at 1%), although elevated operating expenses weighed on sequential operating profitability.
Retail AUM growth was robust at 37% year-on-year, and the company continues to pare down its legacy wholesale loan book in line with prior guidance. However, asset quality in the retail portfolio showed early signs of strain. Gross Stage 3 (GS3) assets in the retail book rose 20 basis points quarter-on-quarter. Management pointed to emerging stress, particularly in unsecured MSME loans, the refinancing segment of used vehicle loans, and small-ticket loan-against-property (LAP) segments.
CLSA also noted that the expected merger with a subsidiary is likely to be completed by September, which should help eliminate the tax burden from Q2FY26 onwards and support reported profitability.
Despite steady execution and improving earnings visibility, CLSA remains cautious due to emerging asset quality challenges in select retail segments.
Disclaimer: The views and investment suggestions expressed in this article are those of the brokerage firm mentioned. These do not represent the views of this publication. Investors are advised to consult their financial advisers before making any investment decisions.
