We initiate coverage on Piramal Enterprises (PIEL) with a buy rating and SOTP-based target price of Rs 2,200. The financial services business contributes ~75% of our total SOTP value. PIEL’s wholesale lending business is on a strong growth path, with new product addition. Apart from financing for real estate, PIEL has started financing for other sectors as well. The wholesale financing book is expected to double in FY17 (R261 billion) and end FY19 with R548 billion. The company has also applied to the NHB for an HFC license — this will supplement the real estate financing business. Turnaround of healthcare business (we expect EBITDA margin to expand from 11% in FY16 to 20% by FY19, partially helped by recent acquisition) and strong traction in private equity/assets under advisory business are other positives.
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