At a Glance
Once the jewel of India’s pharma crown, Piramal Enterprises has now reinvented itself as an NBFC post-demerger. But despite ₹10,000 crore+ in loans, a sprawling branch network, and a powerful surname, it still struggles to find its ROE mojo. Is this a value trap or a stealth turnaround in progress?
1. 📦 From Morphine to Mortgages: The Reinvention of a Piramal
Let’s rewind.
Piramal Enterprises Ltd (PEL) used to be a pharmaceutical behemoth — so much so that it sold its domestic formulations business to Abbott for $3.7 billion in 2010 and became India’s poster child for cash-rich conglomerates.
Fast-forward to 2021:
- It spun off its pharma business into Piramal Pharma Ltd (PPL).
- PEL is now purely a financial services NBFC.
But like every Bollywood remake, the second innings has a mixed script.
2. 💰 Financial Highlights: Lots of Assets, Little ROE
| Metric | FY25 | FY24 | FY23 |
|---|---|---|---|
| Revenue | ₹10,375 Cr | ₹10,110 Cr | ₹8,981 Cr |
| Net Profit | ₹485 Cr | -₹1,684 Cr | ₹9,969 Cr (due to one-off gain) |
| ROE | 2% | 1% | 6% |
| Book Value | ₹1,202 | ₹1,250 | ₹1,260 |
| Gross NPA | 2.84% | 2.83% | 2.67% |
| Interest Income | ₹5,282 Cr | ₹4,344 Cr | ₹3,994 Cr |
💀 Despite nearly ₹95,000 crore in assets and over ₹10,000 crore in revenue, PEL’s return on equity remains stuck below 3%.
It’s like owning a Ferrari but being stuck in Mumbai traffic.
3. 📉 The Fall and Fall of NIMs: Is There a Moat Here?
The biggest issue? Margins.
- Financing margin in FY25: ~5%
- Interest expense rising rapidly due to competition and cost of funds.
- Net interest margin (NIM) is not even close to Bajaj Finance or Chola levels.
Meanwhile, their “Other Income” is often a rollercoaster:
- FY23 saw ₹8,470 Cr in other income (possibly from stake sales/one-offs)
- FY25? Just ₹373 Cr.
Which begs the question:
Is this a lending business or a PowerPoint business?
4. 📉 P/E Looks Crazy — Because Profits Are Tiny
| Metric | Value |
|---|---|
| Market Cap | ₹25,644 Cr |
| Price | ₹1,131 |
| P/E Ratio | 58.6x |
| P/B Ratio | 0.94x |
| Dividend Yield | 0.97% |
Yes, it’s trading below book value — but that’s because the book is thick and unreadable, while earnings are thin.
📉 Its P/E of 58x is artificially high because profits are depressed, not because growth is expected.
5. 🧾 Peer Comparison: The Kids Are All Right
| Company | ROE | P/E | GNPA | Yield |
|---|---|---|---|---|
| Bajaj Finance | 19% | 33.8x | ~1.1% | 0.5% |
| Shriram Finance | 15% | 15.1x | ~6% | 1.5% |
| L&T Finance | 11% | 17.9x | ~3% | 1.4% |
| Piramal Enterprises | 2% | 58.6x | 2.84% | 0.97% |
🧂 Fun fact: Shriram gives better returns with worse asset quality.
PEL? Neither here nor there. Like a startup founder still calling himself “stealth mode” after 4 years.
6. 🏗️ The Group Structure: Still Complicated AF
Let’s unpack the family tree:
- Piramal Enterprises Ltd (PEL): Now a lending-focused NBFC
- Piramal Pharma Ltd (PPL): Contract manufacturing (CDMO), Critical Care, OTC
- Piramal Realty (unlisted): Real estate biz, not directly under PEL
- DHFL acquisition: Bought DHFL in 2021, which still has legacy book risks
The company is still digesting that DHFL meal — indigestion is visible in provisioning.
🧠 Ajay Piramal is still the Chairman, but the question is whether this conglomerate is now a focused lender or a relic of past glory?
7. 🎯 Fair Value Estimate — Or At Least an Attempt
Let’s try two angles:
🔹 Book-Value Based:
- Book value: ₹1,202
- Conservative P/B multiple: 0.8–1.0 (due to poor ROE, high NPAs)
Fair Value Range = ₹960 – ₹1,200
🔹 Earnings-Based (iffy):
- FY25 EPS: ₹21.53
- Normalized P/E: 20–25x (for NBFCs with avg metrics)
Fair Value = ₹430 – ₹540 (earnings basis — very bearish)
Realistic compromise: ₹900–₹1,200 range with a lot of “ifs”.
TL;DR: Is It a Trap or a Turnaround?
✅ Positives:
- Legacy brand, diversified platform, ₹10,000+ Cr revenues
- Gross NPAs under control
- Promoters still own 46% stake
❌ Negatives:
- Pathetic ROE despite huge balance sheet
- Earnings wildly volatile
- High P/E with no growth story
💥 EduInvesting Verdict: This ain’t Bajaj Finance. This is the Dharmendra of NBFCs — aging, respected, still fighting — but not quite the hero anymore.
Unless they pull off an ROE revival and earnings upgrade, this might just remain a value trap that looks cheap… but keeps getting cheaper.
✍️ Written by Prashant | 📅 June 23, 2025
Tags: Piramal Enterprises, NBFC stocks, Ajay Piramal, financial services, undervalued NBFCs, book value investing, ROE analysis, EduInvesting, fair value range, DHFL acquisition
