Piramal Finance Aims for $1B Foreign Loans to Fuel India Retail Boom

Piramal Finance Aims for $1B Foreign Loans to Fuel India Retail Boom

Piramal Finance is planning to raise as much as $1 billion in foreign currency loans this year. This move is designed to meet the strong and growing demand for retail credit in India, a market recognized for its rapid expansion. The non-banking financial company (NBFC) is taking this step to secure capital for its growth plans.

Funding Strategy: Tapping Global Markets

Chief Executive Officer Jairam Sridharan plans to seek loans from foreign banks and multilateral agencies with terms of three to five years. This strategy comes as the Indian rupee has weakened against the dollar, which typically increases hedging costs for foreign currency loans. Piramal Finance will proceed with borrowing in various tranches, depending on a full assessment of total costs, including hedging. Indian companies often borrow from international markets for lower interest rates and longer terms. In February, India's external commercial borrowings rose to $4.63 billion, up from $2.82 billion a year earlier, according to Reserve Bank of India data.

Global Market Challenges and Diversification

Sridharan noted that the current global bond market is not favorable due to global tensions. This leads Piramal Finance to consider financing in currencies other than the US dollar to reduce risks from relying on a single currency. The broader Indian NBFC sector is expected to grow assets under management by 12% to 18% in fiscal year 2026, driven mainly by retail credit and MSME lending. This contrasts with Piramal Finance's own aggressive internal target of 50% AUM growth over the next two years. Key competitors like Bajaj Finance have a market capitalization of about ₹6.05 lakh crore with a P/E ratio around 34.29. Shriram Finance has a market cap around ₹2.36 lakh crore and a P/E of about 23.61. Piramal Finance's market capitalization is around ₹43,000-43,894 crore with a P/E ratio between 28.5-36.39, showing a valuation that is more competitive than Shriram Finance but lower than Bajaj Finance.

Analyst Concerns and Risks

Despite the growth outlook, this funding strategy carries risks. The weaker rupee, even with hedging, can add costs that reduce profits. While Piramal Finance's P/E ratio is comparable to its peers, some analysts point to valuation concerns. MarketsMojo rates the stock 'Hold' and describes its valuation as "very expensive," with a Price-to-Book ratio of 1.4, which is higher than its peer group average. The company's Return on Equity (ROE) has been low, ranging from 0.05% to 5.42% recently, unlike Bajaj Finance's ROE of 18.46%. As of December 2025, Piramal Finance reported a Debt-to-Equity ratio of 2.71, indicating it relies heavily on debt to finance operations. This leverage, combined with potentially lower profitability metrics like ROE, creates a vulnerability if global interest rates rise or if loan quality declines, increasing the cost of repaying foreign debt.

Credit Ratings Boost and Growth Guidance

Piramal Finance's strategic shift is supported by recent credit rating upgrades. S&P Global Ratings raised its long-term issuer credit rating to 'BB' from 'BB-,' and CRISIL assigned an 'AA+/Stable' rating. Management expects these upgrades could lower borrowing costs by 50-80 basis points over the next few years, potentially increasing net interest margins as the older loan portfolio shrinks. The company has guided for 25% AUM growth and approximately 50% profit growth in fiscal year 2027. Analysts generally maintain a positive view, with an "Outperform" rating and an average price target of about INR 1,953.13. Consistent execution will be key to achieving this potential amid current market conditions.