Piramal Finance reduces acquired DHFL book 77% in five years

Piramal Finance says the portfolio originally acquired through the DHFL merger, effective September 2021, had reduced 77% from about ₹41,000 crore to about ₹9,500 crore by Sep-26. Management also cites more than ₹3,000 crore of profit-and-loss gains from stressed-book recoveries, about ₹16,000 crore of assessed carry-forward losses and about ₹19,500 crore of fixed-rate borrowings obtained at merger.

How much of Piramal Finance's acquired DHFL book remains?

Piramal Finance reports that about ₹9,500 crore of the originally acquired book remained at Sep-26, compared with about ₹41,000 crore when the merger became effective in Sep-21. The reduction is 77% on the company’s presentation, leaving about 23% of the acquired portfolio outstanding five years after the transaction.

The residual balance is primarily retail-related. Retail loans declined from about ₹18,000 crore at acquisition to about ₹5,000 crore, while retail off-book assets declined from about ₹20,500 crore to about ₹4,500 crore. Piramal Finance specifies that the off-book retail balance is not included in reported assets under management, or AUM.

Wholesale exposures have declined more than the retail elements. Wholesale loans fell from about ₹2,000 crore to about ₹20 crore, while the originally acquired wholesale security receipts of about ₹450 crore and pass-through certificates of about ₹250 crore had no residual amount listed at Sep-26.

What value does Piramal Finance attribute to the DHFL merger?

Piramal Finance attributes profit-and-loss gains of more than ₹3,000 crore to recoveries from DHFL’s stressed book. This is a management-reported source of merger-related value and is separate from the remaining acquired-book balance of about ₹9,500 crore shown at Sep-26.

Piramal Finance also reports outstanding assessed carry-forward losses of about ₹16,000 crore. The presentation does not quantify when these losses may be used, their tax effect or conditions governing their utilisation. It identifies the assessed losses as one of three ways in which the merger created profit-and-loss value, alongside recoveries and funding.

A third item was about ₹19,500 crore of 10-year fixed-rate, low-cost borrowings at the time of the merger. The presentation describes these borrowings by original tenure and fixed-rate structure, but does not state their coupon, the amount still outstanding at Sep-26 or the funding-cost benefit recognised in Q2 FY27.

Piramal Finance’s current funding figures provide context rather than a direct measurement of the merger borrowing benefit. Incremental long-term borrowing cost was 8.46% in H1 FY27, compared with 8.67% in H2 FY26. Its cost of borrowing, measured as a percentage of debt, was 8.79% in Q2 FY27, down from 8.95% in Q2 FY26.

How has Piramal Finance changed since the September 2021 merger?

Piramal Finance says its growth AUM increased more than fivefold, from ₹4,327 crore before the merger to ₹1,11,440 crore at Sep-26. The post-merger figure was ₹22,628 crore, indicating that most of the increase cited by Piramal Finance occurred after the integration rather than immediately on completion.

Piramal Finance also expanded its physical network from 14 branches before the merger to 301 after it and 838 at Sep-26. The Sep-26 network comprised 535 urban branches, 203 rural branches and 100 gold branches. Employee count rose from about 800 before the merger to about 6,500 after it and about 18,500 at Sep-26.

The product set has widened from pre-merger real estate, loan against property and housing loans. At Sep-26, Piramal Finance listed corporate mid-market loans, digital loans, rural micro loans, unsecured business loans, salaried personal loans, loans against securities and used-car loans alongside housing, property-backed and real-estate lending.

That broader franchise was predominantly retail at Sep-26. Retail represented 86% of AUM and wholesale 14%, compared with an 82:18 retail-to-wholesale split in Sep-25. Housing loans were the largest segment at 30% of AUM, followed by loan against property at 27%, real estate at 8%, salaried personal loans at 8% and digital loans at 6%.

How do Piramal Finance's current earnings and asset-quality figures compare?

Piramal Finance reported profit after tax of ₹545 crore in Q2 FY27, 67% higher year on year, while total AUM was ₹1,13,112 crore, up 24% year on year and 6% quarter on quarter. Retail AUM was ₹97,462 crore, up 30% year on year, compared with total growth AUM of ₹1,11,440 crore reported for Sep-26.

Profitability measures improved from Q2 FY26 to Q2 FY27 in Piramal Finance’s pro forma growth-business presentation. Return on average AUM, calculated as profit after tax divided by average AUM, increased to 2.0% from 1.7%. Pre-provision operating profit was 3.5% of AUM in Q2 FY27 versus 3.3% in Q2 FY26, while credit cost decreased to 1.5% from 1.7%.

Operating-expense ratios also declined. Retail operating expenses as a share of AUM were 3.48% in Q2 FY27, 41 basis points below Q2 FY26 and down from 6.5% in Q4 FY23. One basis point equals one hundredth of a percentage point. Company cost-to-income was 52.1% in Q2 FY27, compared with 61.2% in Q2 FY26.

Asset-quality data showed gross non-performing assets, or GNPA, at 2.4% in Q2 FY27, compared with 2.6% in Q2 FY26. Retail 90+ days past due was 0.7% in Q2 FY27, unchanged from Q1 FY27 and below 0.8% in Q2 FY26. These measures cover the current portfolio and do not separately disclose the performance of the residual acquired DHFL assets.

Conclusion

The presentation portrays the DHFL merger as a balance-sheet clean-up and scale-building exercise: the originally acquired book fell from about ₹41,000 crore to about ₹9,500 crore, wholesale remnants were largely eliminated, and growth AUM reached ₹1,11,440 crore by Sep-26. Management links the transaction to more than ₹3,000 crore of stressed-book recoveries, assessed losses of about ₹16,000 crore and about ₹19,500 crore of long-term fixed-rate funding.

Next, Piramal Finance says it is on track for FY27 targets of about 25% year-on-year total-AUM growth, about 50% consolidated profit-after-tax growth and an exit-quarter return on average AUM of about 2.5%. Management also gives long-range guidance for a further 25-basis-point reduction in operating expenses, while the remaining about ₹9,500 crore acquired portfolio remains an unresolved disclosed balance to monitor.