Piramal Finance Q2 FY27 Earnings Call: PAT Jumps 67% YoY, Targets 2.5% ROA by Q4 FY27 (PIRAMALFIN)

Piramal Finance Ltd held its Q2 FY27 earnings call on October 19, 2026. Here's a quick read of what management said — performance, strategy, and the outlook ahead.

Profit Momentum Accelerates; Capital Position Strengthened

• PAT of Rs.545 Cr in Q2 FY 2026-2027 — up 67% YoY from Rs.327 Cr in Q2 FY 2025-2026; H1 FY 2026-2027 PAT also up 67% YoY, crossing Rs.1,000 Cr. Trailing 12-month EPS growth is 155% YoY.
• Total income grew 33% YoY to Rs.1,767 Cr — pre-provisioning operating profit rose 64% YoY to Rs.846 Cr; proforma PBT for the growth business was Rs.538 Cr vs Rs.344 Cr in Q2 FY 2025-2026.
• Net income margin of 6.5% — up 35 bps YoY; growth business NIM was 6.8%, flat QoQ and vs 6.9% in Q2 FY 2025-2026.
• Equity fundraise of Rs.3,850 Cr completed — QIP of Rs.2,100 Cr plus promoter warrants of Rs.1,750 Cr; net worth stands at Rs.31,180 Cr with capital adequacy at 20.1% (QIP added 200 bps).
• GNPA at 2.4% and NNPA at 1.7% — overall credit cost improved to 1.1% from 1.8% in Q1 FY 2026-2027, aided by a Rs.90 Cr P&L gain from legacy recovery.
• Mr. Dinesh Kumar Khara (former SBI Chairman) — joins as independent director for a 5-year term.

Retail-Led Expansion; Wholesale Prepayments a Headwind

• AUM of Rs.1,13,112 Cr, up 24% YoY in Q2 FY 2026-2027 — growth AUM at 98.5% of total AUM, up 30% YoY; management guided for 25% AUM growth in FY 2026-2027 with a medium-term target of Rs.1.5 lakh Cr by FY 2027-2028.
• Retail AUM grew 30% YoY to Rs.97,462 Cr — unsecured products AUM rose 46% YoY to Rs.23,764 Cr, now 21% of total AUM; management stated unsecured growth is an outcome of favorable micro-level credit trends, not a macro target.
• Wholesale book at Rs.13,978 Cr (Sep 2026), up 24% YoY — average yield of 14.1%; Q2 disbursements of Rs.2,615 Cr across 91 transactions vs repayments of Rs.1,889 Cr (~72% of disbursements).
• 74% of contractual repayments due in FY 2026-2027 already paid — Yash Nadkarni cited the strong prepayment trend as a growth headwind for the wholesale business, despite reflecting robust portfolio performance.
• Legacy AUM down Rs.780 Cr (-32% QoQ) to Rs.1,673 Cr — now 1.5% of total AUM; the reduction was PBT neutral with ECL provision of Rs.459 Cr; management expects to discontinue separate legacy disclosures after Q3 FY 2026-2027.
• Post-DHFL merger (Sept 2021–Sept 2026) AUM grew 5x — from Rs.23,000 Cr to Rs.1.1 lakh Cr, with Rs.3,000+ Cr of gains from the stress book and a Rs.16,000 Cr tax shield from carry-forward losses still available.

Credit Costs Improve; Select Vintage Watch-Points Flagged

• Growth business credit cost of 1.5% in Q2 FY 2026-2027 — down 10 bps QoQ; legacy write-backs lowered consolidated loan loss provisions and fair value loss (~Rs.300 Cr), while growth business credit costs exceeded Rs.400 Cr.
• Housing loan vintage uptick traced to a single Rs.4 Cr fraudulent case — originated in Q2 FY 2025-2026; management expects the metric to normalize in Q2 FY 2026-2027.
• 90+ for used car loans at 1.2% (Q2 FY 2026-2027) — management clarified the sequential increase reflects a static-pool analysis at the 12-month peak risk point, not deteriorating new book quality.
• Persistent small-ticket vs large-ticket risk gradient — noted across products (CL, HL, etc.), though steepness has slightly decreased from CY 2024 levels; gold loans are an exception, with higher risk also at the large end.
• Gold loan penetration on customer files rising industry-wide — from 20-25% to >35% over two years; management cited industry data showing 15-23% of gold loan disbursements over FY 2026-2027 went to customers >90 days past due, while Piramal's comparable October FY 2026-2027 figure is less than 1%.
• 90+% of digital lending covered by FLDG — de-risking Piramal; vintage risk upticks considered immaterial unless they breach 5%.

Well-Positioned for Rising Rates; Spreads Compressing

• Variable rate assets of Rs.56,000 Cr exceed variable rate liabilities of Rs.51,000 Cr — as of Q2 FY 2026-2027, positioning the company favorably for a rising rate environment (Jayram Sridharan).
• Credit spreads compressed 40-45 bps over recent months — incremental borrowing costs declining, a trend management expects to continue as ratings improve; retiring debt is priced at least 60 bps higher than current borrowing costs (Q2 FY 2026-2027).
• Incremental cost of long-term borrowing fell from 9.36% (H1 FY 2025-2026) to 8.46% (H1 FY 2026-2027) — management expects gross cost of borrowing to decline in FY 2027-2028 as ~Rs.29,000 Cr of debt matures at ~9.1% while incremental borrowings are at ~8.4%.
• Almost no borrowings linked to repo rate — MCLR-linked borrowings are about one-third of total, largely with one-year reset tenors and some six-month tenors (Q2 FY 2026-2027).
• Liability mix actively shifted from market-linked to MCLR-linked — the company raised almost nothing from capital markets in Q2 FY 2026-2027 as rates rose; management expects NBFCs to adopt similar shifts in coming months (period unspecified).
• Rate pass-through lag of ~1 year on cost of borrowing plus ~3 months to customers — 50% of assets (home loans, LAP) are variable rate, but no immediate customer rate increases expected until cost impact is seen in FY 2026-2027; management does not plan to raise customer lending rates unless its own funding costs increase.

2.5% ROA by Q4 FY27; IRDAI Draft Regulation a FY28 Overhang

• Management expressed high confidence in 2.5% ROA by Q4 FY 2026-2027 — without relying on a reduction in the cost of borrowing; growth ROAUM of 2% in Q2 FY 2026-2027 is targeted to reach >3% over the long term (period unspecified).
• Three ROA levers identified — (a) OpEx reduction of 30-35 paisa possible over the next six quarters, (b) increasing unsecured mix from 21% to 25-26%, (c) shifting product mix towards high-yield gold loans from low-yield mortgages, with credit costs stable at 1.5% and retail OpEx below 3.5%.
• IRDAI's draft insurance commission capping regulation cited as a FY 2027-2028 headwind — management estimated the consultation paper could cause a gross reduction of 18-24 bps in return on assets in FY 2027-2028, partially offset by a natural hedge via its 50% stake in Primerica Life Insurance; the prior aspiration to approach 3% ROA by year-end is being recalibrated, with formal FY 2027-2028 guidance to be provided in Q4 FY 2026-2027 following ongoing dialogue with the IRDAI.
• AI initiatives (CX.AI, Pia) drove 6.3 lakh customer interactions in Q2 FY 2026-2027 — generating Rs.102 Cr in PL cross-sell and Rs.172 Cr in automated collections.
• Retail OPEX/AUM declined 5 bps QoQ to 3.48% — management is confident of meeting FY 2026-2027 profit growth guidance of 50% YoY.

H2 Funding Cost Pressure; NIM Convergence Expected

• Management expects H2 FY 2026-2027 to see broad-based increase in borrowing costs — driven by RBI's shift from neutral to calibrated tightening.
• Two natural hedges against rising rates cited — run-off of the legacy book and a recent rating upgrade lowering incremental borrowing costs; with legacy share at 1.5%, management expects company NIM (6.5%) to converge toward growth NIM (6.8%) — a natural hedge of ~30 bps — over the next 2-3 quarters (through H2 FY 2026-2027 and early FY 2027-2028).
• Non-dilutive regulatory capital release expected over the next 12 to 24 months — management stated this, combined with the recent capital raise, implies enough runway for growth capital for some years.
• IMF revised India's GDP growth projections upwards — for both FY 2026-2027 and FY 2027-2028.
• Macro risks flagged: rising US and Japanese sovereign bond yields — and crude oil prices remaining high for longer.
• Rural segment exposure of approximately Rs.2,300 Cr — disclosed in the ROA discussion.
• CEO Jayram Sridharan referenced competitor Bajaj's upcoming earnings call in closing remarks, without elaborating on competitive strategy or risks.