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Growth business continues to deliver; legacy drag fades Stable NIM; well-positioned for RoA expansion with all guidance intact

* Piramal Finance’s (Piramal) 1QFY27 net profit rose 67% YoY to ~INR4.6b (PQ: ~INR5b and PY: INR2.8b). NII in 1QFY27 rose 43% YoY to ~INR14.42b. Other income reported during the quarter was INR3.4b (PY: INR3b and PQ: INR5.5b). The company undertook lower direct assignment (DA) transactions in 1QFY27, resulting in lower other income. ? PPOP grew ~89% YoY/~16% QoQ to ~INR8b (PY: INR4.25b and PQ: INR6.9b).

* RoAUM in 1QFY27 for the growth business stood at 1.8% (vs. ~1.5% in 1QFY26 and 2.1% in 4QFY26).

* The company reiterated its 4QFY27 RoAUM target of ~2.5%. Operating leverage is expected to remain a key driver of RoA improvement for Piramal, as AUM growth continues to outpace opex growth. The company expects the opex-to-AUM ratio to improve by ~40-50bp over the next 4-5 quarters, supported by operating scale. This, along with an improving business mix and lower CoB (also aided by its recent credit rating upgrade), is expected to drive RoAUM expansion to ~2.5% by 4QFY27.

* Asset quality remained broadly stable across lending segments, except for a minor sequential increase in 90+ dpd in Home Loans and LAP. The unsecured loan segments remained resilient, while microfinance asset quality continues to improve. Management shared that it has observed some earlystage bounce/delinquencies in mortgages from salaried customers employed in the IT Sector, primarily in South India. The company already shared that this does not indicate any trend, and it expects the overall asset quality to remain strong.

* Piramal continued to sustain strong loan growth momentum, with the growth businesses continuing to scale meaningfully and increasingly driving overall portfolio expansion. Improving operating leverage, expansion in margins (from an improving product mix and lower CoB), and disciplined cost management are expected to support further RoA improvement.

* The Board has approved an equity fund raise of up to ~INR40b. This is an enabling resolution, and we will factor it into our estimates when further concrete details around the timing and specific instruments are shared by the company. We estimate a total AUM CAGR of ~26% (including a ~27% CAGR in Retail AUM) and a PAT CAGR of 56% over FY26-FY28E, with an RoA/RoE of 2.5%/12% in FY28E. Reiterate our BUY rating on the stock with a TP of INR2,620 (based on Mar’28E SoTP; refer to Exhibit 1).

Valuation and view

* Piramal delivered a steady operational performance despite 1Q typically being a seasonally weak quarter, with sustained retail loan growth, improving operating efficiency, and continued reduction in the legacy wholesale portfolio (~2% of the AUM). Business momentum remained intact, with no impact from the West Asia geopolitical situation, while management maintained its growth guidance. Stable asset quality and improving operating metrics further reinforce the company’s transition toward a more stable and profitable lending franchise.

* We estimate a total AUM CAGR of ~26% (including a ~27% CAGR in Retail AUM) and a total PAT CAGR of 56% over FY26-FY28, with an RoA/RoE of 2.5%/12% in FY28E. We reiterate our BUY rating on the stock with a TP of INR2,620 (based on Mar’28E SoTP).

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