Piramal Finance Q2 Profit Zooms 67% to Rs 545 Crore

Piramal Finance Q2 results surprised the Street on Monday, with the non-bank lender reporting a 67 per cent jump in net profit to Rs 545 crore for the September quarter, driven by strong core income growth and improved cost efficiency. The company's core net interest income grew 35 per cent to Rs 1,530 crore on the back of a 24 per cent expansion in assets under management and a 0.35 per cent widening in the net income margin to 6.5 per cent. The Piramal Finance scrip closed 0.08 per cent lower at Rs 1,948.05 on the BSE on Monday.

Piramal Finance Q2 net profit driven by core income

The Piramal Finance Q2 net profit growth was powered by a 35 per cent rise in core net interest income to Rs 1,530 crore. Assets under management grew 24 per cent during the quarter, while the net income margin expanded 0.35 percentage points to 6.5 per cent, indicating better pricing and a healthier product mix. The cost-to-income ratio improved sharply to 52.1 per cent from 61.2 per cent a year earlier, a significant efficiency gain that flowed directly to the bottom line. The cost-to-income ratio has now improved by more than nine percentage points in a year, a sharp turnaround that should support NBFC earnings momentum in coming quarters. Analysts said the Piramal Finance results show operating leverage kicking in as the lender scales its retail-focused lending book.

Margin expansion plan and rating upgrade tailwind

Managing Director and Chief Executive Jairam Sridharan exuded confidence about the road ahead, saying the company is uniquely positioned in the NBFC universe and does not see a threat to margins even in a rising interest rate environment. The Piramal Finance Q2 management commentary was notably upbeat on the funding cost outlook. He said the company expects to expand net interest margins by up to 0.20 per cent over the next year. When asked how that would be possible despite rising rates, which push up an NBFC's borrowing costs, Sridharan explained that a recent rating upgrade will help reduce the cost of borrowing over the next two to three years and expand margins. The Piramal Finance Q2 commentary suggests funding costs will be a key lever for profitability going forward.

Piramal Finance Q2 AUM and wholesale repayments

The Piramal Finance Q2 AUM growth of 24 per cent would have been even higher but for elevated repayments ahead of contracted terms, Sridharan said, adding that nearly 70 per cent of fresh disbursals were repaid during the quarter. The tendency to repay ahead of schedule is higher in the wholesale segment, particularly in real estate, where borrowers are showing the highest preference for prepaying debt. Realty sector AUM growth for the quarter stood at about 7 per cent but would have been up to 25 per cent without the early repayments, he said. Management expects the wholesale book to stabilise as the interest rate cycle turns.

Asset quality and board appointment

On asset quality, Sridharan said the company has not witnessed stress in any segment, despite concerns around small business loans from the West Asia crisis and agriculture from the El Nino factor. He reiterated that loans in South India to salaried IT employees continue to show signs of stress, and the company remains circumspect about lending to such borrowers. The gross non-performing assets ratio remained stable at 2.4 per cent as of September. Separately, the company announced the appointment of former SBI chairman Dinesh Kumar Khara as an independent director for five years, strengthening its board. The latest Piramal Finance Q2 results confirm that the lender's pivot to retail lending is delivering improving profitability. Sustained NBFC earnings momentum across large lenders suggests the Piramal Finance results are part of a broader sector recovery.