Piramal Enterprises Limited – AR 2017 – Key highlights

Prepared by FI – Reading the AR

 29 years, 30% Annualized Shareholder Returns

 Topline 34% growth, Bottomline 38.4% growth in FY17
 Dividend Rs 21 per share
 Total assets – 49239 Cr
 In last 29 years, above 90% of key capital allocation decisions
successful

 Serious about taking Shriram to the next level

 51% of PEL FY17 revenues generated in foreign currencies
  Higher OPBITDA margin 42.5% in FY17, 29.1% in FY16
 Finance costs higher 2031 Cr FY17, 959 Cr FY16 (Lending)
 Assets increased by 3030.2 Cr in FY17
 BV of investments 25180.6 Cr FY17, 16316 Cr FY16

Employees distribution:

 170 employees (high performers) went thru ASCEND program

o 51 high potentials getting groomed for next level
o 31 senior leaders SUMMIT program
o Basically, next level leadership being built early on
Financial Services:

 Loan book growth 87% to 24975 Cr

 Cumulative repayments 18464 Cr in last 6 years
 Target Credit rating improvement

Real Estate Financing: (Loan Book 90% growth in FY17)

 Construction Financing
o Moving beyond Infra Space
o Grade A Office Space opportunity
o 12688 Cr deployed FY17
 Flexi Lease Rental Discounting
o Help existing partner developers raise capital against
current asset to expand
o Loan to value ratio of 70% – 75%
o 1196 Cr FY17 disbursed
 Corporate Finance Group (CFG):
o Yield of around 12% - 18%
o Loan book growth of 73% in FY17
 Partnership with Ivanhoe Cambridge
o Private Equity partnership to fund blue chip residential
developers
o 250 M USD (25% for Pure Equity, 50% for Preferred
Equity, Rest by Ivanhoe)
 Only for Grade A developers who have proven track
record
 Preferred Partner Program
o Support only partners who have good BS and proven
o 50% of pre approved limits already sanctioned to Grade
A developer partners
 Distressed Asset Fund – Bain Capital
 o Huge untapped opportunity
o Invest in opportune turnaround directly with active
restructuring
o Focus on acquiring large borrower assets from banks and
financial institutions and work towards revival and
turnaround
o Received Alternative Investment Fund (AIF) license from
SEBI
o Robust pipeline
 Tapping huge opportunity in retail housing finance
o Loans beyond salary class exploration
o PEL will benefit - 85+ developing partners, 275+ projects
in India
o PEL can become preferred financier
o Working on Digital backend for the same to cut costs
 New Products
o Senior lending
o Loan against shares
o Promoter funding
o Acquisition financing etc
 All above partnerships (Ivanhoe, Bain, APG, CPPIB) generate
fee income
 Preferred partner for marquee offshore institutional investors
 Using analytics for decision making in FS
 Automation
 224 employees in FS
o 60 in investment team
o Balance in Legal, Asset Monitoring, Risk Mgmt, Support
 Risk team is independent and can overrule investment
decisions
 CPPIB, APG – access each investment - Check Thesis of PEL
 Each project monitored very closely – Quick remedial measures
taken
o Increase Security
o Modify business plan
o Change sweep ratio of escrow account
 Above is reason for Gross NPA – 0.4%

 To mitigate risk if borrower goes to default, not meeting PEL

requirements:
o Inhouse Project development arm – Address Makers
 Can take over and complete project
o Inhouse distribution arm – Brickex
 Can sell completed project
 ROE – Above 25%
 2.2% Provisioning

Pharma:

 Since Abbott, CAGR 17%

 Half a billion USD deployed in last 2 years for organic and
inorganic investments and initiatives
 13 manufacturing facilities – 9 are USFDA approved
 70% revenue comes from America and Europe
 Major Pharma companies getting lesser valuation due to
Regulatory issues – PEL stands out
o All Regulatory inspections cleared (28 USFDA, 78
Regulatory, 568 Customer Audits)
 Absolutely no instance of production stoppage
 Sailed through well in demonetization and FDC headwinds
 MSD, Pfizer, Little acquisitions successfully integrated
o Surpassed annual sales within 8 months of launch

Decision Research Group:

 Viewing the 16B USD market now with investments and wider
focus
 Revenue of DRG saw 6% growth in FY17

Compiled by Fundamental Investor

www.fundamental-investor.com

Feel free to write to me - investorfundamental@gmail.com