Piramal Finance shares in focus after Q2 net profit jumps 67%; Margins, asset quality stable

Shares of Piramal Finance Ltd. are in focus on Wednesday, October 21, after the company reported a strong set of earnings in the second quarter. The numbers were reported after market hours on Monday.Piramal Finance's profit after tax and assets under management increased, margins and asset quality remained stable, while the proposed Insurance Regulatory and Development Authority of India's commission cuts remain a key risk.Piramal Finance's net profit increased by 66.7% to ₹565 crore from ₹327 crore last year, while its net interest income was at ₹1,530 crore, up 35.2% from last year's ₹1,132 crore.Its operating profit was also up 64.3% at ₹846 crore from ₹515 crore in the previous fiscal.The company's net interest margin expanded to 6.5% from 6.2% last year and remained unchanged sequentially.Asset quality for Piramal Finance remained largely stable with gross non-performing assets remaining unchanged at 2.4% compared 2.4% last quarter, while its net NPA increased by 10 basis points to 1.7% from 1.6% sequentially.Piramal Finance's total AUM increased by 23.7% to ₹1.13 lakh crore from ₹91,477 crore in the previous year and was up 5.8% sequentially.The company's management in a post-market conference call maintained its AUM growth guidance for the financial year 2027 at 25%. It is targeting 50% PAT growth for the fiscal as well.

It is targeting 2.5% Return on Assets by the fourth quarter compared the the current 2%.In the long-term, the management's AUM target is for ₹1.5 lakh crore and Return on Assets is above 3% by March 2028.It expects cost of borrowing to remain stable or decline despite rising yields. The company plans to double its branches for gold loans from 100 to 200 by March next year. It is also aiming at increasing unsecured AUM mix from 21% to 25%-26%.The Piramal Finance management also said that the IRDAI's proposed commission caps could impact its FY28 return on assets by 18 to 24 basis points before mitigation.Post the mitigation, lower incentives and insurance-related adjustments could partly offset the impact, it added.Nomura Maintains "BUY" rating on Piramal FinanceGlobal investment banking firm Nomura has a "buy" rating on the Piramal Finance stock and a target price of 2,550 per share.The growth book's asset quality trends are largely stable, while there is some stress in the mortgage book, it said.Nomura said the Piramal Finance stock trades at a one-year forward price-to-book ratio of 1.4x.Piramal Finance BUY OR SELL?Of the 10 analysts who have coverage on the stock, nine have a "buy" recommendation while one has a "hold" rating.Shares of Piramal Finance ended the previous session flat at ₹1,950 apiece. The stock has fallen 12.2% in the past month but is up 18.5% this year, so far.Also Read: Bajaj Finance shares in focus after Q2 results, increased AUM guidance, margin pressure