Piramal Capital & Housing Finance reported a 67% increase in quarterly net profit to ₹545 crore, driven by a 35% rise in interest income. While profit margins improved, the company is facing a challenge with borrowers paying off real estate loans ahead of schedule, which has held back growth in that specific segment.
Piramal Capital & Housing Finance delivered a strong financial performance in the September quarter, with its net profit climbing 67% to ₹545 crore compared to the same period last year. The company’s core business, represented by its net interest income, grew by 35%. This growth in income was a major factor in the company’s ability to boost its bottom line. Additionally, the company saw its net interest margin, which is the difference between the interest it earns on loans and the interest it pays on its own borrowings, rise to 6.5%. This is a 0.35% improvement, suggesting the company is becoming more efficient at managing the gap between its lending and borrowing rates.
A key development for investors to watch is the trend of early loan repayments. Management highlighted that about 70% of new loans were paid back by borrowers before the agreed time. This trend was especially noticeable in the real estate sector. While receiving cash back early might seem positive, it reduces the total interest income the company earns over the life of a loan. The impact was significant enough that the real estate asset growth was limited to 7%, whereas the company believes it could have reached 25% if these early payments had not occurred.
To manage future profitability, the company is focused on lowering its own borrowing costs. The management indicated that recent improvements in credit ratings are expected to help the company borrow money at cheaper rates. If successful, this strategy could provide a safety net against the current high-interest-rate environment and potentially allow for further expansion of profit margins in the coming year. The company also reported that its cost-to-income ratio, a measure of how much it spends to generate revenue, improved to 52.1%.
Regarding asset quality, the company’s gross non-performing assets—which are loans that are overdue or not being repaid on time—remained steady at 2.4%. Management noted that despite wider concerns about stress in small business and agricultural loans across the industry, the company has not seen significant issues in these areas. However, there is some caution regarding specific segments of the IT workforce in South India, where pockets of stress remain.
To strengthen its oversight, the company has appointed Dinesh Kumar Khara, the former chairman of the State Bank of India, as an independent director for a five-year term. Investors will likely track whether the strategy to reduce borrowing costs succeeds and how the company manages the trend of early loan repayments in the upcoming quarters.