Piramal Enterprises posts net loss

Shares of Piramal Enterprises fell as much as 10% after the company reported a consolidated net loss of Rs 1,702.59 crore for the quarter ended March as against a net profit of Rs 454.63 crore a year ago.
Net sales declined 2% on year to Rs 3,341 crore in March quarter. Results were announced after market hours on Monday. Pharmaceuticals segment revenue grew by 10% to Rs 1,623 crore in Q4.
The company’s pharma operations continued at all sites globally, and for the whole year revenue was up 13% to Rs 5,419 crore, while EBIDTA reached Rs 1,400 crore.

The process of fundraising is on track in its pharma business with the company issuing a minority stake to potential financial investors. It plans to monetized its stake in the Shriram Group at the appropriate time.
Financial services segment revenue declined 11% to Rs 1,718 crore in Q4 March.
Loan book stood at Rs 50,963 crore with top-10 exposures reduced by Rs 4,200 crore during the year. Cash and cash equivalents stands at Rs 8,900 crore as of 31 March. Capital adequacy ratio of the financial services business rose to 31% in Q4 from 22% a year ago.

Key Q4 FY20 Concall Highlights
Asset Quality deteriorates and dependence on Real Estate to have a short term negative impact
Total loan book declined by 7% YoY and by 1% QoQ and stood at Rs. 50,963 Cr.
This is a deliberate strategy by the co as it shifts focus towards having liquidity and reducing large single borrower exposures. Exposure to top 10 borrowers has reduced from Rs. 18404 Cr last year to Rs. 14187 Cr today.
Only 1 exposure is above the threshold of 15% of net worth of the NBFC business against 3 last year.
AUM Mix: Wholesale Real Estate 70%, Corporate 15%, Hospitality 4%, Retail (Housing) 11%.
Home loans grew to Rs. 5534 Cr vs QoQ Rs. 6139 Cr (-10%) & YoY Rs. 5188 Cr (+7%).
PEL intends to reduce its ATS from Rs. 75-80 Lacs to ~Rs. 30 Lacs by targeting customers in tier 3/4 cities where there is no competition from banks.

Lodha exposure is at Rs. 3,000 Cr (same QoQ) and should reduce over next 6 months.
GNPA increased to 2.4% from QoQ 1.8%. GNPA increased mainly as 2 accounts slipped. Both the accounts were restructured (Marvel for Rs. 208Cr & Maitra group for Rs. 50 Cr). PEL took a write/off of Rs. 30 Cr on the Marvel account.
PEL created Rs. 1,903 Cr of additional provision to mitigate potential contingencies. Total provisions as a % of GNPAs is at 246% vs QoQ 100%.
85-90% of total borrowers have opted for moratorium. However, in the HFC, only 20% have opted for moratorium.
CAR is at 31% vs YoY 22%.

RBI mandate on provisioning related to Covid is applicable only to Banks and not to NBFCs.
LTRO 1.0: PEL was sanctioned Rs. 1000 Cr. LTRO 2.0 was not for HFCs.
For the Pharma Business Q4FY20, revenue grew 10% YoY to Rs. 1623 Cr.
EBITDA margins expanded here from 23.5% to 29.3% on YoY basis.
All pharma cos will be held under a single subsidiary where PEL would then sell a minority stake to investors. This will pave way for eventual demerger of the pharma business. The whole process would take around 3 years.
Debt in pharma business will be at Rs. 3000 Cr (after the capital raise) from Rs. 4500 Cr currently.
Net net we expect that FY21 is likely to be a washout year for the company and possibly FY22 growth will resume again.

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