Piramal Enterprises Limited (‘PEL’, NSE: PEL, BSE: 500302, 912460) today announced its consolidated results for the Third Quarter (Q3) and Nine Months (9M) FY2020 ended 31st December 2019.
Financial Highlights
Revenue:
• Up 9% to INR 3,806 Crores during Q3 FY2020 vs INR 3,489 Crores in Q3 FY2019
• Up 14% to INR 10,915 Crores during 9M FY2020 vs INR 9,536 Crores in 9M FY2019
Net Profit1:
• Up 20% to INR 724 Crores during Q3 FY2020 vs. INR 602 Crores in Q3 FY2019
• Up 20% to INR 1,749 Crores during 9M FY2020 vs INR 1,462 Crores in 9M FY2019
Note: 1) Net Profit excludes exceptional gain/loss for the period 2) Previous year figures are restated for accounting impact of Piramal Phytocare Merger
Mr. Ajay Piramal, Chairman, Piramal Enterprises Ltd. said, “We are pleased to announce consistent performance demonstrated by 14% YoY revenue growth to INR 10,915 Crores and net profit growth by 20% YoY to INR 1,749 Crores for nine months FY2020, especially given the sectoral volatility in the markets that we operate in.
By end of FY2020, we will have exceeded our earlier stated commitment of bringing in INR 8,000 – 10,000 Crores of equity in the Company, with inflows of up to ~INR 14,500 Crores, through various initiatives including Preferential Allotment to CDPQ, sale of DRG and our Rights Issue that witnessed active participation from most existing large investors including the promoters. Our repeated partnerships with marquee global and domestic investors are an affirmation of the robustness of our business model and future growth trajectory.
With this capital infusion, our Company is well-capitalized to tap both organic and inorganic opportunities arising from industry consolidation and effectively transform our Financial Services business from a largely wholesale business into a well-diversified financial services business. In our Pharma business, that is consistently delivering robust performance quarter after quarter, we plan to further raise additional equity capital for its future growth. Infusion of additional capital in Pharma is the next step towards unlocking value of the Company.”
Strengthening of balance sheet
• The Company has exceeded its commitment of bringing in INR 8,000-10,000 Crores of equity during the year, with inflows to the extent of ~INR 14,500 Crores through several major milestone transactions.
− INR 1,750 Crores from preferential allotment to CDPQ, an existing long-term investor, is a validation of the strength of the business model and the future growth prospects of the Company
− ~INR 3,650 Crores from the Rights Issue – oversubscribed more than 1.15x times, with participation from most large existing investors, including Promoters, who increased their commitment to the Company
− ~INR 6,750 Crores from sale of the Healthcare Insights & Analytics business, realizing 2.3x returns on the initial equity investment in INR terms, at a valuation of ~5x EV/ trailing sales and ~20x EV/ trailing adj. EBITDA
− ~INR 2,300 Crores from stake sale in Shriram Transport Finance (announced earlier in the year)
• Debt-to-equity at 1.2x times as of Dec-2019 (on a pro-forma basis), with equity capital of ~INR 34,000 Crores as of
Dec-2019. Also, the Company deleveraged the balance sheet with debt reduction of ~INR 15,000 Crores since Mar-2019.
* Pro forma based on Dec 31, 2019 reported numbers, adjusted for fund raise from Rights issue and sale proceeds received from DRG
Business & Operational Highlights
Financial Services:
• The Company is transforming the Financial Services business into a well-diversified model across both wholesale and retail financing
• Loan Book of INR 51,429 Crores vs. INR 53,055 Crores as of Sep-2019, amid reduction of large single borrower exposures
− As of Dec-2019, only one exposure is higher than the threshold of 15% of net worth, whereas all other exposures are below 12% of the net worth of the Financial Services business
Wholesale Financing:
• In Wholesale financing, the Company is selectively tapping superior ‘risk-reward’ & last-mile funding opportunities
• Wholesale lending yields have improved ~150bps vs. Q2 FY19, as the Company was able to pass on rates to customers
Retail Financing:
• Housing Finance forms 12% of the overall loan book (vs. 7% a year ago) with 56% YoY growth
• The Company is building and scaling-up a retail consumer financing business
Asset quality:
• GNPA ratio of 1.8% as of Dec-2019 vs. 0.9% as of Sep-2019, as few accounts moved from Stage-2 to Stage-3
• ‘Stage 2 & 3’ loans as a % of overall loan book increased only 30bps QoQ to 2.1% (vs. 1.8% as of Sep-2019)
• The Company has witnessed no major ‘loss given default’ since Sep-2018, as a result of the strong risk management & governance framework and healthy security cover
Liabilities-side:
• Long-term funds of INR 4,276 Crores was raised in Q3 FY2020
• Cost of funds continue to gradually decline, as the Company raised INR 1,900 Crores at or below 9% recently
• Significantly deleveraged the business, with debt-to-equity at 2.8x times as of Dec-2019 vs. 4.6x times a year ago
Pharma:
• Consistent growth: PEL’s 9M Pharma revenue grew at a CAGR of 16% over last 9 years
• Profitability: EBITDA margins are at 23% for 9M FY2020 with consistent improvement in margin over last few years
Global Pharma
• Quality & Compliance: Successfully cleared 3 USFDA inspections for key facilities at Bethlehem, Lexington and Pithampur, 19 other regulatory inspections, and 108 customer audits during 9M FY2020. PEL never had any ‘Official Action Indicated (OAI)’ for any of our USFDA audits
India Consumer Healthcare
• YoY topline growth of 37% with revenues at INR 336 Crore for 9M FY20
Plans for infusing growth capital into the Pharma businesses
• Plan to bring Pharma businesses under a subsidiary and raise funds by issuing a minority stake (<20%) to potential financial investors
• This fund raise will not just provide capital for growth, but will also enable value discovery for our pharma business
• To target both organic and inorganic growth opportunities across businesses we operate in.
• Evaluating re-entry in domestic formulations
Business-wise Revenue Performance
(INR Crores or as stated)
Net Sales break-up Quarter III ended 9 Month ended
31-Dec-19 31-Dec-18 % Change % Sales 31-Dec-19 31-Dec-18 % Change % Sales
Financial Services 1,963 1,840 7% 52% 5,931 5,131 16% 54%
Pharma1 1,307 1,156 13% 34% 3,796 3,309 15% 35%
Global Pharma 1,193 1056 13% 31% 3,460 3,063 13% 32%
India Consumer Products 114 100 14% 3% 336 245 37% 3%
Healthcare Insights & Analytics 536 492 9% 14% 1,188 1,062 12% 11%
Others - 1 - - - 34 - -
Total 3,806 3,489 9% 100% 10,915 9,536 14% 100%
1. Pharma revenue includes revenues from Global Pharma and India Consumer Products
2. Foreign Currency denominated revenue in Q3 FY20 was INR 1,599 Cr. (42% of total revenue) and in 9M FY20 was INR 4,268 Cr. (39% of the total revenue)
3. Previous year figures are restated for accounting impact of Piramal Phytocare Merger
Consolidated Financial Performance
Particulars
(INR Crores or as stated) Quarter III Ended 9 Months Ended
31-Dec-19 31-Dec-18 % Change 31-Dec-19 31-Dec-18 % Change
Net Sales 3,806 3,489 9% 10,915 9,536 14%
Non-operating other income 141 103 37% 271 228 19%
Total income 3,947 3,592 10% 11,186 9,763 15%
Other Operating Expenses 1,510 1,463 3% 4,264 4,387 -3%
OPBIDTA 2,437 2,129 14% 6,923 5,377 29%
Interest Expenses 1,442 1,169 23% 4,269 3,094 38%
Depreciation 166 133 26% 491 385 28%
Profit before tax & exceptional items 829 827 - 2,162 1,897 14%
Exceptional items (Expenses)/Income - - - (25) (452) -
Income tax
Current Tax and Deferred Tax 231 293 -21% 708 637 11%
Profit after tax (before MI & Prior Period items) 598 534 12% 1,429 808 77%
Minority interest - - - - - -
Share of Associates1 126 68 86% 295 201 47%
Net Profit after Tax 724 602 20% 1,724 1,009 71%
Net Profit Margin % 18% 17% - 15% 10% -
Net Profit (excluding Exceptional item) 724 602 20% 1,749 1,462 20%
Net Profit Margin %2 18% 17% - 16% 15% -
EPS (Rs./share) 35.30 29.67 19% 84.50 49.80 70%
Normalised EPS (Rs./share)2 35.30 29.67 19% 85.74 72.06 19%
1. Income under share of associates primarily includes our share of profits at Shriram Capital and profit under JV with Allergan, as per the new accounting standards.
2. Net Profit excludes Exceptional gain/loss for the period
3. Previous year figures are restated for accounting impact of Piramal Phytocare Merger
