Dear Shareholders,
My warm greetings to all of you.
Hope you and your families are safe and in good health.
India today ranks as the 5th largest economy in the world according to the World GDP
Rankings 2023 and stands tall amongst most emerging economies. As economies across the
globe grapple with geopolitical tensions, high inflationary environment and monetary
tightening, the India story is one of resilience, backed by strong macro fundamentals and
prudence governance.
AJAY G. PIRAMAL
Chairman
Domestic aspects such as improved capex, increased consumer demand, corporate
deleveraging and revived investment cycle continues to shield us, however we are not
completely isolated from impending global slowdown. IMF projects India's growth to
moderate to 5.9%% in 2023 vis-a-vis 6.8% in 2022.
Over the last few years, our strategy has been to make our balance sheet and businesses
more resilient and robust to tide over unforeseen uncertainties. Our efforts have shown
results and we ended the year with a net profit of Rs 9,969 Crores and total assets of Rs
83,752 Crores, with a diversified AUM mix at 50:50 for Retail and Wholesale business.
BUILDING A RESILIENT BUSINESS TO DELIVER SUSTAINABLE GROWTH
FY2023 has been a milestone year for Piramal Enterprises Limited and our objective has
been to build diversified and resilient businesses, focused on execution.
• We completed one-year post DHFL's successful integration. With multi product
retail offerings and strategic use of technology, PEL today has a pan India platform,
democratising credit for the underserved 'Bharat' markets. The overall AUM stood at Rs
63,989 Crores, AUM mix of 50:50, with the retail loan book growing by 49% yoy to Rs 32,144
Crores.
• Additionally, as envisioned, we successfully completed the demerger of the
Pharma business in Q2FY23. We now have two separate sector-focused listed entities in
Financial Services and Pharmaceuticals, namely Piramal Enterprises Limited and Piramal
Pharma Limited respectively. The demerger allows us to simplify structures, focusing on
strengthening governance practices, while we optimise capital usage. Both entities will
now focus on independent growth strategies, helping unlock shareholder value, allowing
shareholders to be a part of two growth stories.
We are now focused on sustained growth and profitability and to achieve our balance
between three pillars - Growth, Risk and Profitability. Focused business entities ensures
not only focus in terms of business strategies, but also help strengthen and ensure
efficient use of our capital and human resources.
Foundations of Growth
We have made significant headway in building a strong resilient business model, giving
us the ability to manage risk more efficiently and tide over different economic and
business cycles. We are certain that the consequent long-term value creation for all
stakeholders will be achieved by strategically selecting our specialised bets in retail
and wholesale backed by cutting edge technology, assiduous risk management, and
exceptional leadership.
a. Simplification of the Corporate Structure
Creating two separate pure-play entities in Financial Services and Pharmaceuticals has
resulted in a stronger governance architecture, with dedicated Board and Management teams
for the two businesses. Our experienced Board of Directors together bring on the table,
decades of industry specific expertise and knowledge. The demerger allows us to ensure
optimal capital structures for each business and will facilitate the businesses to grow
independently, by pursuing both organic and inorganic growth plans. Further, this also
facilitates a better understanding of each entity for the analyst and investor community.
b. DHFL Integration and Retailisation
One of the key focus areas for PEL has been to increase the share of Retail loans in
the AUM mix. While DHFL acquisition was a catalyst, the Company's in-house multi-product
offerings is a major contributor to the increasing AUM. PEL's retail portfolio comprises
varied lending products under four broad buckets of secured and unsecured lending. The
customer profile, largely self-employed, are from Tier 1, 2, 3 cities and towns of India.
The products are customised to cater to the real 'Bharat' of India, keeping into account
the lack of credit access and history.
New to credit and underserved customers are tapped into by both the vast expansive
physical branch network of 404 branches and through key digital partnerships. Steady
disbursements have resulted in the change of the Retail Wholesale mix to 50:50, which is
in line with our stated mid-term target. PEL is on track to achieve our stated of goal of
reaching Retail: Wholesale mix of 2/3 and 1/3 respectively
c. Diversified and Scalable Portfolio
Retail business provides us the diversification on a business as well as product level,
thereby reducing concentration risk. On the Wholesale front, we remained focused on
providing adequately during the year while growing the Wholesale 2.0 AUM, bringing us
closer to our desired target of 2/3rd Retail composition in the medium term. We have
adopted a technology backed approach for our Retail Lending business, which would drive
scale and growth. This allows us to have a multi-product approach where banks are less
present, giving us the flexibility and ability to reach our customer base both physically
and digitally.
We have grown our customer franchise to a commendable figure of ~3 Million and new
customers acquired grew 3x over last year to ~0.4 Million. With an active customer base of
>1 Million customers and a network of 404 branches across 26 states/union territories
across the country, we are steadily growing our network and increasing physical presence
pan India. Digital finance is an important customer acquisition vehicle providing us
significant cross selling opportunities. This approach is leading to a significant growth
traction in the Retail Lending business. In FY2023, the retail disbursements stood at Rs
18,371 Cr witnessing a healthy - 6x growth. As we continue to expand our retail lending
business, we are also investing in manpower, branch infrastructure, technology, and
analytics for its future growth
We are now focused on sustained growth and profitability and to achieve our balance
between three pillars - Growth, Risk and Profitability
d. De-risking Wholesale 1.0
The Company has taken a strategic call to run-down the Wholesale 1.0 book. Last year,
we focused on recoveries and monetisation which resulted in 33% book reduction on yoy
basis and it now stands at Rs 29,053 Crores as on March-23. We continue to focus on
resolution of stressed assets, which will further moderate the wholesale book size in the
near term. A dedicated specialised team is working towards monitoring and executing the
resolution strategy for complex recoveries and enforcement, aimed at improving recoveries
and monetization of assets.
e. Building a Granular Wholesale 2.0
We laid the foundation of Wholesale 2.0 in FY2022 and continue to make active progress
on our strategy. Our strategy is to remain vigilant across our portfolio and executing new
deals in our Wholesale 2.0 business.
We will build this book in a calibrated manner while capitalizing on the market gap.
Adapting to the market landscape and opportunities, we continue to build our book across
the Real Estate and Corporate Mid - Market Loans (CMML). In Real Estate, we will focus on
large and medium sized developers, wherein 49% of the projects are in late stage or
completed. Leveraging our retail setup, we will also be selectively entering into Tier-2
and Tier-3 markets, which are relatively under penetrated. The average ticket size is
around Rs 200 Cr for Real Estate Loans and Rs 55 Cr for CMML loans. The Corporate
The Wholesale 2.0 AUM stood at f 2,792 Crores as on March 31, 2023.
Mid - Market loans are granular, cash flow backed and spread across multiple sectors
and geographies. We are focused on building a layered book, with different risk-return
propositions, adhering to boundary conditions and guardrails. We are also concentrating on
an analytics-driven underwriting vertical buildout and proactive asset liability
management. The Wholesale 2.0 AUM stood at Rs 2,792 Crores as on March 31, 2023, which is
backed by enhanced risk management processes and best in class governance.
f. Risk Management and Technology
Risk management, internal controls and assurance processes are embedded into all
activities of the Company. A Sustainability and Risk Management Committee has been set up
to ensure implementation of stricter controls and procedures, facilitate the shift towards
a more sustainable economy, and encourage the adoption of technological advancements. As a
part of our technology initiatives, we have built in-house software development
capabilities to build and scale our digital assets. Our new 'Piramal Innovation Lab' a
36,000 sq. ft hub in Bengaluru is established to accelerate the development of
next-generation lending solutions and analytics. We are building a world-class tech and
Artificial Intelligence (AI)- driven lending business, which is cloud-native and hence
scalable.
We will continue to:
• Expand our branch network further, to a 1,000 locations. Currently ~50% of our
loan book comes from Tier 1,2 and 3 cities and towns, as we lend to 'Bharat' markets in
Retail lending.
• Strengthen our product suite by launching new differentiated higher-yielding
products.
• Enter into new partnerships with Fintech and Consumer Tech firms to acquire
customers at scale and at low acquisition costs.
• Investment in cutting edge technology at the core of our lending, to help us
improve cost efficiency, manage asset quality, and improve customer service to stay ahead.
Our new 'Piramal Innovation Lab' a 36,000 sq. ft hub in Bengaluru is established to
accelerate the development of next- generation lending solutions and analytics.
Adequate Provisioning and Enhanced Focus on Resolution
Our gross NPA for the year stood at 3.8% in March 2023 vs 3.4% in March 2022. The asset
quality of the retail book has been in line with our expectations. With technology backed
scorecards and AI/ML underwriting processes, we have maintained asset quality and the
acquired DHFL book is performing in line with our expectations.
Last year we started the process of reevaluating and conducting a detailed risk
assessment of the wholesale portfolio. The provisions as a % of Wholesale AUM stood at
10.5% completing the 'Recognition' and 'Provisioning' parts of our asset cycles. We are
now deep in the 'Resolution' part of the cycle. Several tools are deployed for resolution
of stressed assets including monetization of underlying assets, one-time settlements,
enforcement via Insolvency and Bankruptcy Code (IBC) and portfolio sales to ARCs in cash
and or security receipts (SRs). We were successful in concluding four stressed assets
monetization transactions in Q4FY23 through a combination of asset sales and ARC deals.
In FY23 we generated over Rs 12,500 Crores of cash realisation through accelerated
repayments and resolution proceeds from our Wholesale 1.0 portfolio. As the resolution
processes continue, we will use the above- mentioned tools for recovery of Wholesale 1.0
portfolio. We remain vigilant across our portfolio while maintaining adequate provisioning
to tide over of any unforeseen contingencies.
Non-lending Businesses
Alternatives Platform
Our fund management business has marquee institutions like CDPQ and Bain Capital Credit
as our long-standing partners. The platform had ~USD 1 billion in committed capital across
two funds namely the Piramal Credit Fund and India Resurgence Fund as of March 2023. We
aim to build a robust Alternatives platform, by scaling-up the existing funds and
launching newer funds soon.
Life Insurance Business
The DHFL acquisition, resulted in us acquiring a 50% stake in Pramerica Life Insurance
(JV with Prudential-US). The company has a customer base of ~3.5 Million and a network of
~15,000 agents. Given that the Company has a robust balance sheet reflected in its
Solvency Ratio of 369%, we aim to drive growth of this business in the coming years. In FY
2023 PLI was the fastest growing Life Insurance company with a growth rate of 129% on the
basis of overall New Business Premium (NBP).
Robust Liability Management
Over last few years, we have focused on strengthening our liability profile by
replacing short term borrowings with long term borrowings and diversifying the borrowing
mix Our ALM profile has a significant positive ALM gap across all buckets. Our cumulative
ALM gap (up to 1 year) stood at 24% for Q4FY23.
Our average borrowing costs has been gradually declining over the last few quarters and
reduced by 100 bps to 8.6% in FY2023 vs 9.6% in FY2022. We expect the borrowing costs to
remain stable as we continue to diversify the book, tap additional funding sources to
diversify the borrowing mix and repay/re-finance high-cost debt. Further, we
The alternatives platform had ~USD 1 billion in committed capital across two funds
namely the Piramal Credit Fund and India Resurgence Fund as of March 2023.
are well-positioned to navigate the current rising interest rate environment, as 59% of
our borrowings are on a fixed rate basis.
Business Outlook
We intend to achieve the following mid-term priorities, which will help us progress on
our growth path and create long term value for our shareholders.
• Target a mid to high teens AUM growth, with a mix of 2/3 Retail and 1/3
Wholesale.
• Grow Wholesale 2.0 business by focusing on building a granular Real Estate and
Corporate Mid - Market book that's cash-flow backed and supported by superior underwriting
and risk management processes.
• Scout for inorganic growth opportunities.
• Maintain a conservative liability mix while we aim to achieve a 3% RoA and
mid-teens RoE.
We are already a sizeable, national-scale NBFC with an equity of Rs 31,059 Crores and
capital adequacy ratio of 31%. We continue to maintain a strong liquidity with cash and
liquid investments of Rs 7,430 Crores. (9% of Total Assets). With a strong liquidity
cushion and well capitalised balance sheet we are now poised to unlock value and see
sustained growth and profitability going forward
BUILDING A FUTURE-READY ORGANISATION
At Piramal Group, our people and culture are at the heart of our business. Driven by
our core values of Knowledge, Action, Care, and Impact, these values act as the guiding
principles of our culture. With a purpose of 'Doing Well and Doing Good', we believe that
responsible and ethical business practices is the foundation of organisational growth and
individual success. These value and purpose define the core foundational behaviour for not
only the employees but also all our stakeholders, thus ensuring that we partner with the
right people in business. We are working towards creating an organised, diverse, and high
performing work environment for employees.
A customer-centric hiring approach and diversity in hiring will ensure quality customer
service. An entrepreneurial and trusteeship mindset will continue to be cornerstone of the
organisation's success.
Strong Talent Pipeline
The Company hired and on boarded over 10,191 employees in FY2023. As of March 31, 2023,
the headcount was over 12,220, with a primary focus on hiring high-potential personnel
from the industry and facilitating business growth. We also hired 49 summer interns and
about 629 management trainees for different businesses across the Company.
As part of our annual exercise, this year we identified and groomed over 10
high-potential employees for future leadership roles through our flagship top talent
programmes like ASCEND and Ignite, involving personalised skill development journeys and
exposure to business-critical projects in line with their aspirations.
Our campus recruitments ensure the right talent is hired from prestigious universities
and cultivates home -grown talent. We have also implemented a variety of initiatives for
different businesses to advance our employees and retain our key talent. These range from
system-enabled manager-specific attrition scorecards that leverage predictive models,
surveys for new hires after 30, 60, and 90 days, cross-functional projects, Career
Opportunities
We are already a sizeable, national-scale NBFC with an equity of f 31,059 Crores and
capital adequacy ratio of 31%. We continue to maintain a strong liquidity with cash and
liquid investments of f 7,430 Crores
Program and an internal job portal. These programmes have helped employees chart their
own career journey. The Piramal Learning University also offers various online courses fo
upskilling, which employees can take at their own pace and place, completely free of cost.
Employee Wellbeing
In line with our value of care and our commitment to employee health and wellbeing,
extra efforts were made post the COVID-19 pandemic. When employees were back in office,
people felt socially deprived being isolated for such long periods of times. To increase
employee engagement activities, an employee resource group called the High Voltage Group
was formed to empower and run social and cultural activities across all our offices and
branches. By providing each branch the discretionary powers to plan their own activity, we
ensured they had flexibility and choices for having fun. We also launched a networking
site exclusively for women, enabling them to collaborate and grow together through various
interactive learning and development sessions. 'Second innings'
- an initiative that helps experienced female employees come back into the workforce
and we also introduced flexi work hours at our retail finance offices. Additionally,
special
benefits and childcare support is extended to employees with children under six years
of age. We have also inculcated a gender-neutral primary care giver and parental support
scheme for all employees. The Piramal Group has always been driven by the ethos that it is
imperative to create a safe, secure, and positive working environment for the wellbeing of
all employees, which will in turn create an environment conducive to the organisation's
success.
DOING WELL AND DOING GOOD
Driven by the purpose of 'Doing Well and Doing Good' and guided by the spirit of Sewa
Bhaav, the Piramal Foundation dedicatedly works with the Central Government and various
State Governments, NGOs, civil society and academia across water, health & sanitation,
women empowerment, and youth leadership. Over the last 15 years, our work has touched and
impacted 113 Million lives. The Foundation has a significant footprint in 27 States and 2
Union Territories.
Despite the best efforts of the Government and other players, social inequalities
continue to be prevalent. Recognizing the need for a paradigm shift, we re-imagined the
Foundation's approach and organized our
Over the last 15 years,
Piramal Foundation has touched and impacted 113 Million lives. It has a significant
footprint in 27 States and 2 Union Territories.
solutions as 5 Big Bets that will help India to reach her Sustainable Development Goals
by 2030. To achieve this, we are deploying a multi-directional approach in the Development
Sector for the benefit of our stakeholders:
1. Enabling marginalized populations to benefit from India's growth story
2. Strengthening capacity across communities through leadership development,
digitization and healthcare programs.
3. Developing the nation's youth and creating future leaders who can participate in
nation building.
4. Accelerating the growth of rural women by equipping them with digital skills and
achieving the larger vision of women-led development.
Our endeavor is to ensure that the development efforts transform at scale through our
'Platform approach' that draws resources, expertise and innovation to tackle social sector
problems. The Foundation's diverse partnerships and alliances enables it to drive systemic
transformation through enhanced capacity. Some of our key partnerships include Central and
State governments and their departments, international NGOs, philanthropies and
multilaterals like Bill & Melinda Gates Foundation, USAID, CIFF etc., knowledge and
technical partnerships with universities and domain experts like Emory University and
Bridgespan.
Our 5 Big Bets - 'Anamaya' Tribal Health Collaborative, Aspirational Districts
Collaborative, Digital Bharat Collaborative, Piramal School of Leadership and Tapas (The
Piramal Academy of Sewa) reflect our commitment to create value for our stakeholders. Each
Big Bet has been designed to empower individuals at grassroots level, strengthen systems
by leveraging technology and leadership development to bring about lasting transformation.
By adopting this approach, we aim to contribute meaningfully to the well-being of
communities across India and drive sustainable development in alignment with our
philosophy of 'Doing Well and Doing Good'.
IN CLOSING
During FY2023, our businesses have demonstrated a resilient performance as we navigated
the global macroeconomic and geopolitical headwinds. The Company continues on its stated
path of implementing renewed strategies to drive sustainable growth. The Company's major
transformation exercise saw fruition in FY2023, and it is the foundation on which
sustainable growth will accrue in the coming time.
We completed one-year milestone of the DHFL acquisition and its integration, thereby
driving growth and diversification of the business, progressing towards making it more
retail
oriented. In Wholesale, we have successfully completed the asset recognition cycle,
adequately providing for assets and creating a healthy provisioning buffer.
We remain confident about the long-term success of the financial services business, as
we inch closer towards our FY27 stated aspirations. PEL with its unique business model,
size and balance sheet strength is poised to tap growth opportunities profitably and
create sustainable long-term value.
The Board has recommended a dividend of f 31 per share, subject to the shareholders'
approval at the AGM. The total dividend pay-out would be f 740 Crores.
I would like to thank all our stakeholders, including shareholders, employees,
customers, and partners. They are the driving force behind the success of our businesses.
We will continue to execute on our strategic priorities to meet the needs and aspirations
of all who place their faith in us and our vision for the future.
Please take care of yourself and your family and stay safe.
Best regards,
AJAY G. PIRAMAL
Chairman