Driven by a clear mission, Piramal Enterprises has been actively reshaping itself over the past few years. As a part of our strategic roadmap, we steered our journey into a well-diversified, nonbanking finance company, with a commitment to driving lasting positive change, building a strong corporate culture, and laying a solid foundation for value creation and sustained growth.
Our legacy is built on innovation, integrity, and impact. Our commitment to these principles ensures we continue to be a force for good.
Over the last 2-3 years, the Company has gone through a business and management transformation, and this process accelerated further in FY 2023-24. Having navigated this transformative journey, we are encouraged by the strengthening performance of our new businesses. We are also optimistic that the lingering effects of our legacy challenges will largely fade away this year.
Our Growth business performed commendably, as it continues to be set on the path of steady profitability. Profit Before Tax (PBT) for this business increased 39% in the year at ₹ 1,044 crore, from ₹ 751 crore in the earlier year. AUM for the business grew by 55% YoY to ₹ 54,273 crore, Net Interest Income (NII) reported an increase of 50% YoY at ₹ 3,065 crore, while Fee Income was higher by 101% YoY at ₹ 570 crore. Op-Ex in FY 2023-24 grew 51%, whereas PPOP at ₹ 1,411 crore was up 63% YoY. Credit cost stood at 0.9% vis-à-vis 0.4% in FY 2022-23.
As far as the legacy business is concerned, i.e., Wholesale 1.0, we took a strategic decision this year to further accelerate the rundown of AUM and lower the non-yielding asset proportion of the book. We believe a smaller legacy book will also benefit our cost of funds over the medium to long term.
On our consolidated performance, the Company reported a Net Loss of ₹ 1,684 crore, impacted by AIF (Alternative Investment Funds) provisions of ₹ 2,473 crore made during the year. We expect to mostly recover these provisions, as demonstrated in fourth quarter of FY 2023-24.
During the year, we continued to make progress across key areas which included steadily growing AUM of our new businesses, AUM mix optimisation and moderation in Op-Ex ratios. We remain focussed on optimising our operating leverage in the Growth business and reducing contribution of the Legacy business.
OUR GROWTH BUSINESS PERFORMED COMMENDABLY, AS IT CONTINUES TO BE SET ON THE PATH OF STEADY PROFITABILITY. PROFIT BEFORE TAX (PBT) FOR THIS BUSINESS INCREASED 39% IN THE YEAR AT ₹ 1,044 CRORE, FROM ₹ 751 CRORE IN THE EARLIER YEAR.
Let us talk about the sustained ramp-up in the growth business. Against our FY2028 targets highlighted in the previous fiscal year, we made faster-than-expected progress on AUM growth and AUM mix, led by the growth business. Our Growth AUM grew 55% YoY at ₹ 54,273 crore, forming 79% of the Total AUM vis-à-vis 34% in FY 2021-22.
Within the Growth business, Retail AUM grew 49% YoY at ₹ 47,927 crore. Growth business comprised 88% Retail AUM and 12% Wholesale 2.0 AUM and has reported 57% CAGR since FY 2021-22. This led total Assets Under Management growth of 8% YoY.
Our Retail AUM stood at ₹ 47,927 crore, up 49% YoY from ₹ 32,144 crore in March 2023, signifying a strong growth trajectory. Retail lending AUM contributed towards 70% to our total AUM. Disbursements continued to rise at INR 28,555 crore, reporting 55% growth YoY. AUM yields were at 13.4% at the end of FY 2023-24 vis-à-vis 12.8% in FY 2022-23.
Mortgage AUM, which includes Housing and LAP, grew 38% YoY at ₹ 32,612 crore, and formed 68% of Retail AUM. With sustained growth momentum and portfolio quality, Piramal is an at-scale lender in affordable housing finance. With sharp uptick in disbursements, AUM of Mortgage LAP increased 52% YoY. Among other Secured Loans, steep growth trajectory was reported by Used Car Loans. In Unsecured Loans, disbursements were controlled in the past year; and risk was under control. On Digital Embedded Finance, today, almost 85% of loan disbursement is credit protected.
Today, we have customer franchise of 4.1 million customers and a branch network of 490 conventional branches and 194 microfinance branches in 26 states/UTs and 625 districts. This network is focussed in metro adjacent, Tier 2&3 locations in India. We continue to grow our customer franchise with 1.3 million active customers. Our branch mix has been shifting towards newer branches, which would now drive productivity improvement. With products customised to cater to the underserved customers of real “Bharat”, we have a solid presence in Tier 2&3 cities and towns across India.
We remain well-aligned with the Government’s overarching objective of serving this key segment, creating a significant impact on society, and contributing in our way to the development of the Indian economy. We strive to create an improved “Bharat” and fulfilling the credit needs of small businesses and micro-enterprises through our tech-led and multi-product franchise. We are one of the largest providers of affordable housing finance. Our mission is to address “Bharat” segment’s diverse credit needs, besides also serving rural markets through microfinance.
AUM of Wholesale 2.0 increased 127% YoY to ₹ 6,347 crore in FY 2023-24, compared with ₹ 2,792 crore in the earlier fiscal year of FY 2022-23. The portfolio quality is performing well, in line with or ahead of underwriting, as reflected in prepayments of ₹ 2,314 crore during the year. Total AUM of Wholesale 2.0 encompassed ₹ 4,243 crore (67%) contributed by real estate, while ₹ 2,104 crore (33%) was shared by corporate midmarket lending.
We built cash flows and asset-backed Wholesale 2.0 book across real estate loans by capitalising on market gaps and leveraging our key strengths. In corporate mid-market lending, we are building a sector-agnostic, diversified and granular book backed by cashflows and assets. With Wholesale 2.0, we are seeking to revitalise wholesale lending by addressing market gaps, such as that in small developer finance, paving the way for renewed growth.
AS WE APPROACH THE FINAL STAGES OF OUR TRANSFORMATION JOURNEY, WE THRIVE AS A PUREPLAY FINANCIAL SERVICES BUSINESS, EXCELLING IN HOUSING-LED, MULTI-PRODUCT RETAIL, AND A DIVERSIFIED AND GRANULAR WHOLESALE, ALTERNATIVES, AND INSURANCE PLAYER.
The AUM of Legacy business (Wholesale 1.0) declined 50% YoY to ₹ 14,572 crore as on March 31, 2024, from ₹ 29,053 crore at the end of FY 2022-23. The business generated gross liquidity of ₹ 10,245 crore. Stage 2 + 3AUM has been reduced by 33% year on year, and we remain focussed on continuing to rundown the legacy book in the coming quarters too.
Going further, as we continue our strategy of rapidly reducing legacy business, we expect the Legacy book to further fall below ₹ 6,000-7,000 crore by FY 2024-25. Legacy AUM will then be less than 10% of Total AUM by the end of FY 2024-25, less than 5% of Total AUM by FY 2025-26. With these measures, our aim is to make the Legacy book inconsequential. As the resolution processes continue, we expect our Security Receipts portfolio to also reduce in the near term.
We expect our AUM to grow by 15% YoY to ~₹ 80,000 crore by FY 2024-25, despite the rundown in legacy AUM. Retail: Wholesale mix will shift closer to 75:25. We expect growth business OPEX to AUM, a key driver of our profitability, to keep moderating to 4.6% by Q4 of FY 2024-25. By FY 2027-28, we are expecting our AUM to touch ₹ 1.5 lakh crore, from our earlier guidance of ₹ 1.2-1.3 lakh crore. The ROA target is unchanged to 3.0% to 3.3%. In addition, the assessed carry forward losses of ₹ 10,627 crore provide an upward potential to ROA and PAT over the next several years including for FY 2027-28.
We have laid the groundwork for a substantial restructuring of the Company during the current year, by way of the proposed merger between lending entities – Piramal Enterprises Limited (PEL) and Piramal Capital and Housing Finance Limited (PCHFL). This strategic decision is aimed at further simplifying the group structure and secure seamless regulatory compliance. We are creating a stronger, more flexible entity that enhances the value for all the stakeholders and provides shareholders with direct access to the entire lending business, thus underscoring our commitment to enhancing stakeholder value.
As part of the composite scheme of arrangement, PEL will be merged with PCHFL, its wholly-owned and 100% subsidiary. The merged entity will operate as Piramal Finance Limited (PFL). As per the terms of the merger consideration, the shareholders of PEL will receive one equity share of PFL for each share they hold in PEL, along with, and subject to RBI approval, one NCRPS (non-convertible noncumulative non-participating redeemable preference share) of ₹ 67 of PFL.
The merger addresses the regulatory requirement of PCHFL, currently classified as an upper-layer NBFC, to be listed by September 2025. The entire process will be completed in 9-12 months. Ahead of the merger, PCHFL would apply to RBI for an NBFC-ICC licence, given our diversified lending profile. Upon the receipt of the licence, PCHFL is proposed to be renamed as PFL. The existing HFC licence will continue in the interim period, until PCHFL receives the NBFC-ICC licence.
Today, the Company has achieved significant milestones outlined in the strategic roadmap. The core of this transformation is a strong commitment to build a dominant retail-oriented business, while diversifying our retail and wholesale portfolios, as we phase out our legacy portfolio.
As we approach the final stages of our transformation journey, we thrive as a pureplay financial services business, excelling in housing-led, multi-product retail, and a diversified and granular wholesale, alternatives, and insurance player. The preceding two years have been special as we achieved significant developments outlined in our strategic roadmap and made progress across key areas. In the past two years, we validated our strategies with rapid scale-ups in Retail and Wholesale sectors, meticulously managing pricing and asset quality, while sustaining the growth momentum and enhancing underlying profitability. After completing the integration with Dewan Housing Finance Limited (DHFL), our retail business has continued to grow, now touching almost Rs 50,000 crore in AUM, and has established itself as among the leading lenders to budget customers in ‘Bharat’ markets.
As we reach out to more MSMEs, we continue to be rooted in our values and driven by passion. Our philosophy of ‘Doing Well and Doing Good’, with our core values of Knowledge, Action, Care, and Impact have been constant in our journey and serve as guideposts to help us become the company we aspire to be.
With our focus on building a “housing led, multi-product platform” in retail, we are one of the biggest providers of affordable finance to customers in India, serving small businesses and micro enterprises, and being aligned well with the government’s aim of promoting MSMEs. We are aiming to have the Retail Lending segment account for 75% of our total assets, reflecting our strategic focus.
Today, we can boast of a diverse retail portfolio, with a keen emphasis on secured lending, while managing an impressive AUM and are witnessing substantial growth in disbursements. Our AUM growth momentum, business optimisation, enhanced underlying operating profitability and improved asset quality are a few strategic developments of this remarkable transformation journey.
Through our new Wholesale 2.0 business too, we look to fill a gap in NBFC lending to real estate and corporate sectors, at an opportune time when a new growth cycle is beginning. We believe there is an opportunity to serve underpenetrated and less competitive tier 2&3 markets through our wholesale business, as well, and thus making a lasting impact.
One theme we are immensely pleased with is that of being “data driven” and leveraging technology and analytics to the farthest extent. As we are actively expanding our businesses, we continue to make substantial investments in people, best-in-class technology, distribution channels, analytics, talent acquisition and branch infrastructure, ensuring a solid footing for our future endeavours and growth. This, we are confident, will help us grow further in this space and reap the benefits in the financial year of FY 2024-25.
With the right investments in technology, people, and branch infrastructure, we continue to enhance our presence in Tier 2&3 cities and ensuring a multi-product branch network. While we seek to protect our net interest margins; fee income growth is robust. With optimised OPEX ratios, the growth business would to deliver healthy operating profit. In FY 2023-24, we made complete provisions for investments in AIFs, subsequently removing them from AUM. Our confidence in the full recovery of these investments remains strong, as reflected in recovery reported in the fourth quarter of FY 2023-24 already.
In line with our consistent focus on long term value creation for our stakeholders and effective utilisation of capital, we conducted a Share Buyback of 1.4 crore equity shares worth ₹ 1,750 crore during the year. The share buyback was in line with our capital allocation strategy of investing in core businesses and returning the excess capital to shareholders. In yet another strategic development, we sold 8.34% stake of Shriram Finance Limited for ₹ 4,824 crore and other Shriram investments for ₹ 1,440 crore.
As the drag of our legacy AUM run-down reduces in FY 2024-25, we are moving towards our mission of continuous and profitable growth. Moving ahead, we remain focussed on keeping a tight control on our asset quality and building the book prudently and cautiously; while also ensuring a healthy growth in the business. We remain steadfast in our pursuit of AUM growth, and in achieving the desired retail to wholesale mix. With a clear roadmap, we aim for enhanced return on assets in retail and wholesale segments over the next five years, staying on course to achieve our targeted 3.0% to 3.3% Return on Assets by FY 2027-28.
In the same note, we continue to demonstrate our commitment to environmental, social and governance principles. We will pursue our adopted ESG strategy and make sustainability as corner-stone to our long-term profit growth.
We take this opportunity to thank all our shareholders for the patient support they shared during our difficult journey of transformation in the past 2-3 years. However, as we reach the last stretch of this journey, I am truly encouraged by the solidifying performances of our new businesses, and the confidence that going forward into FY 2024-25, the overhang of our legacy business will largely disappear.
We greatly value our experienced team and Board that brought deep industry knowledge and guided us through our journey in financial services, along with technological advancements, all the while upholding our aspirational vision and core values.
We are geared to deliver compelling and enhanced value propositions. I take this opportunity to thank all our stakeholders – our customers, investors, and regulators – for their continued support.
And finally, my sincere thanks to our exceptionally talented and hardworking team, who are relentlessly pursuing our mission every single day.
As we continue to dream bigger, we look forward to your continued support.
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