Piramal Enterprises reported a net loss of Rs 1,703 crore for the quarter ended March 31, 2020, on the back of one-time provisioning of Rs 1,900 crore in the fourth quarter due to the ongoing Covid-19 crisis.
Piramal Enterprises reported a net loss of Rs 1,703 crore for the quarter ended March 31, 2020, on the back of one-time provisioning of Rs 1,900 crore in the fourth quarter due to the ongoing Covid-19 crisis. The bottomline was also impacted by a one-time accounting change, as it moved to lower tax regime of 25% and the sale of its DRG business. The company had reported a net profit of Rs 455 crore in the quarter ended March 31, 2019.
Total provisions increased to Rs 2,963 crore, which represents 5.8% of the company’s book — its highest ever, compared to 1.8% of the book at the end of December. The provision has been taken in Stage 1 and 2 of the assets and it is across the company’s wholesale book, which is both real estate as well as corporate.
Piramal Enterprises chairman Ajay Piramal said that while there are some specific provisions, most of it is a general provision because it is difficult to estimate what the environment is going to be. “It is out of prudence that we took a higher provisioning than what we have done before,” he said. He further said that the advantage regards to real estate is, that the defaults are not much, while there might be some delays in repayments. However, in some of the assets of infrastructure and corporate, there could be loans that may become an NPA.
Without the three one-time items, the company would have reported an increase of 40% y-o-y in net profit to Rs 807 crore for the January-March 2020 period. Calling out the current scenario as unusual and extraordinary, Piramal said the economic recovery may take some time, and while it is difficult to make real estimates, he said that it will take at least two-three quarters to even reach the December 2019 GDP level of 4.7%. Piramal said he does not expect that even the government sees GDP going up to 6.5-7.5% before 2021-2022.
“This crisis is going to impact all the industries. The liquidity being one of the challenges. The RBI has taken initial steps to enhance the liquidity, and we expect many more steps there,” Piramal said.
The company’s net sales fell by 2% to Rs 3,341 crore as Piramal said that the company is not chasing growth in the financial services business, and the focus instead is on preserving liquidity and deleveraging the business. The financial services debt/equity ratio stood at 2.6x versus 3.9x a year ago. The wholesale loan book has declined 12% y-o-y and the company’s top 10 exposures have come down by Rs 4,200 crore, he said.
On the stated goal of strengthening the balance sheet, Piramal said that during the year, the company was able to bring in Rs 14,500 crore of additional capital through the sale of DRG, realising Rs 6,800 crore, preferential allotment of shares to CDPQ got the company Rs 1,750 crore, the rights issue was of Rs 3,500 crore including Rs 1,600 crore put in by promoters. The company also sold its stake in Shriram Transport for Rs 2,300 crore. Thus, the equity base has now increased Rs 30,500 crore. The company in Q1FY20 had said that it would strengthen the balance sheet by bringing in Rs 8,000-10,000 crore of equity.
The company’s net debt reduced by Rs 17,800 crore from Rs 55,000 crore to about Rs 37,000 crore and net debt to equity is 1.2x versus 2x in March 2019. The company’s loan book stood at Rs 51,000 crore and because of the Covid-19 situation the company has done an additional allocation of Rs 2,000 crore to financial services from its unallocated equity pool that the parent has. “Post allocation, an equity of Rs 15,600 crore and borrowings of Rs 39,000 crore gives us leverage of 2.6x in the financial services space compared to 3.9x at the end of March 2019,” he said.
On the issue of Franklin Templeton’s exposure to papers of Piramal Capital, Piramal said that the company will meet all obligations in full. “I think it is due in May, so whenever it is due it will be met,” he said.
PEL’s pharmaceutical business reported revenue increase of 10% y-o-y to Rs 1,623 crore, while a 13% rise to Rs 5,419 crore for the full year ended March 31, 2020. With Ebitda margins at 26%, FY20 Ebitda for the business crossed Rs 1,400 crore. India Consumer Healthcare revenues grew up 25% to Rs 418 crore.