- The NBFCs are still not out of the crisis. The shit still has to hit the roof for many players.
- Rating agencies have become over-cautious and has given the entire industry a downgrade. The recent downgrade for 300cr borrowing of PEL from AA+ to AA- is a result of that. Of the entire 40,000+cr, just the latest 300 has suffered a notch down in rating.
- Strategic Priority that has been moved from the long term to the short term.
- Diversified and more long term borrowing profile.
- ECB in Q1.
- Dollar bonds immediately after that.
- Loan diversification
- Growth to come from Retail and corporate lending.
- Retail lending to go beyond HF.
- DE for financial will be 3.5-4.0 max.
- Expect the RoE to move from 18% to 20% soon due to FEE based income.
- Exit on domestic generic Pharma to abbot has still been a good move.
- Global EBITA in Pharma business is 23% on a 1,000 cr turnover. The differentiated strategy of staying out of generics and concentration on ADJ instead of API and speciality and CDMO has played much better than Indian or foreign generics.
- DRG did not do as well as we expected to but we bought when the $ was 52 and it is now 70 and that basic gain is still with us. Green shoots however have already appeared this year. Both the margin and growth will get better as more work is being done from india.
- 5-7% growth. Ebita margin of 22%
- Trying to sell Shriram.
- Thinking of consolidating the entire Shriram business into one company.
- Make money in stray dogs and store in pedigree. – Radhakrishna Damani.
- Buy stray dogs and sell them as exotic species – Ajay Piramal.
- DRG we have not yet given up yet.
- Q1 will be much better
- NIM has increased.
- Fee income started.
- Dollar and ECB will have concluded.
- DHFL
- Intend not to buy the company but just some part of the loan book.
- We will eat the cream and leave the Oreo biscuit.
- QUALITY – STRUCTURE VALUATION will be the guiding principles as usual.
- Any domestic formulations business will be via acquisition only.
Go through the investor presentation, attached below. Pay special attention to pages 2, 26 and 30.
At a 44,000+ cr M.Cap PEL has generated a cash flow of 2,600 cr and a PAT of 1,640cr. Very rarely are companies a value buy for 5 years continuously even after going up 10x.
Buy !
“Buy stray dogs
…………and sell them……”….This reflects the mentality of Ajay Piramal of trying to dupe and befool people for their own benefit….How selfish…..
Ks ko itna ghussa kyon aata hai ?
So why price fell yesterday? Your analysis is excellent ,
Thank you 🙂
Accounting profit in the results vary largely with the normalised profits of the year. Just a knee jerk reaction to not reading the fine print. It should be back up tomorrow, i guess.
Dear Nitin,
Even even / eight years ago people have not understood PEL and we got an opportunity to invest.. Over the years AP has done many things right ( Vodafone investment, Finance foray, differentiated pharma solutions etc) and few wrongs ( like Digital imaging foray, research initiatives which were closed down etc) and some average ( Shriram, DRG). Even then many of us are getting about 6 / 7 % dividend yield on investments now.
I am imagining the impact of 10000 cr inflows due to disinvestment of Shriram ( whenever it happens) which has a potential to save interest costs and add a 1000 cr to bottom line every year..Fantastic ..
From a 400 cr bottomline company in fy 2010 to about 2000 Cr bottom line in FY 2020. 5 X in 10 years inspite of returning so much of capital.. So we have a potential 4000 Cr net profit per year company by 2022..
Do share your thoughts..
Satish, glad to see you looking at Piramal with a macro view, because there is actually no other way to look at it. Piramal has taught me to think in broad ranges and you seem to be doing the same.
The scenario you outlined is one of the best case scenarios, which would really compel you to invest.
Im looking at the other extreme, wherein even in the worst case of a 2,000 cr Lodha write off, there still seems to be super value in the company, given that they have already learnt to lend, are listing DRG soon and getting FPI to buy out parts of their loan portfolio.
Very excited about the FEE income.
Thanks for the reply and true..looks like the true LT potential will unfold by 2021..
Hi Nitin,
Piramal Enterprises at an interesting price point again.. Looks like at the current valuation the financial services is almost free.. Your thoughts especially with the rights issue coming in..
Two of the most ‘rage’ of today’s market are Pharma and Financial.
PE is the only company which is into both of these two.
In my opinion, AP has done good job of managing the Company and taking it to new heights every year.
Rating watch/downgrade is due to current NBFC imbroglio which will finally blow over in the next 6 to 8 months.
PE should not trade below 3500-4000 in any case.
Yes, I agree, think of 10,000 coming in from the divestment of Shriram investment and subsequent ‘investment’ opportunity of deploying this huge money and/or consequent savings on interest / deleveraged balance sheet and further boosting ability to take further debts on book.
Huge potential and a good company.