Piramal Finance new debt cost below FY28 maturity costs

Piramal Finance reported an 8.46% cost on long-term debt raised in H1 FY27, below the 9.08% cost of debt maturing in H2 FY27 and 9.07% in FY28. PFL attributed lower incremental borrowing costs to rating upgrades, while its stock cost of borrowings declined to 8.79% in Q2 FY27.

How much cheaper is PFL's new long-term debt?

PFL's H1 FY27 long-term borrowing cost was 62 basis points below the 9.08% cost of debt due in H2 FY27 and 61 basis points below the 9.07% cost of FY28 maturities. A basis point equals one-hundredth of a percentage point. This compares the cost of incremental long-term debt raised with the cost of debt scheduled to mature, rather than providing a forecast for future average funding cost.

PFL's incremental debt cost declined by 90 basis points from 9.36% in H1 FY26 to 8.46% in H1 FY27, following an intermediate 8.67% in H2 FY26. The Rs 28,840 crore FY28 maturity pool is more than three times the Rs 8,516 crore maturing in H2 FY27, making the FY28 refinancing comparison the larger of the two disclosed maturity pools.

Which rating changes does PFL link to borrowing costs?

PFL linked lower incremental borrowing costs to rating actions disclosed between January 2026 and September 2026. The presentation lists AA+ with stable outlook from Crisil Ratings, CareEdge Ratings and ICRA; a positive outlook and subsequently Ba2 with stable outlook from Moody's Ratings; a BB upgrade from S&P Global Ratings; and BBB with stable outlook assignments from JCR and R&I.

The presentation describes the actions as domestic and international rating developments and says they lowered incremental borrowing costs despite an upward shift in market rates. PFL does not quantify the effect of any individual rating action, lender or instrument on the 8.46% H1 FY27 incremental borrowing cost.

PFL's stock cost of borrowings declined by about five basis points since the upgrades, according to the presentation. Cost of borrowings was 8.84% in Q4 FY26, 8.80% in Q1 FY27 and 8.79% in Q2 FY27, after reaching 9.17% in Q3 FY25. That sequence indicates that the reported stock-cost change occurred gradually as newer borrowing entered the overall debt balance.

How is PFL protected from near-term interest-rate repricing?

PFL reported that 39% of borrowings were fixed-rate as of September 2026, while 31% were linked to the marginal cost of funds based lending rate, or MCLR, and 30% were market-rate linked. The company therefore classified 70% of borrowings as fixed-rate or MCLR-linked, with 30% directly linked to market rates.

The fixed and floating mix differed between liabilities and assets at September 2026. Fixed-rate liabilities were Rs 33,000 crore and floating-rate liabilities were Rs 51,000 crore, compared with fixed-rate assets of Rs 51,000 crore and floating-rate assets of Rs 56,000 crore. PFL reported total borrowings of Rs 83,800 crore, noting that the small variance from gross debt in its balance sheet primarily reflected Indian Accounting Standards adjustments and the fair value of external commercial borrowings.

PFL also used several funding channels. Banks accounted for 45% of borrowings by lender type, followed by external commercial borrowings at 20%, individuals, Hindu undivided families and corporates at 8%, securitisation at 6%, and mutual funds and insurance at 5% each. By instrument, loans represented 42%, non-convertible debentures and bonds 31%, external commercial borrowings 20%, securitisation 6% and commercial paper 1%.

What liquidity cushion does PFL report?

PFL reported positive cumulative asset-liability management, or ALM, gaps across every disclosed bucket as of September 2026. In the up-to-14-days bucket, cumulative inflows were Rs 5,520 crore against Rs 1,034 crore of outflows, producing a positive 434% gap. At up to one year, Rs 50,695 crore of inflows exceeded Rs 34,591 crore of outflows, for a 47% positive gap.

The positive gaps continued at longer maturities. In the up-to-three-years bucket, cumulative inflows of Rs 98,060 crore were 15% above outflows of Rs 85,446 crore. In the over-five-years bucket, inflows of Rs 1,67,579 crore exceeded outflows of Rs 1,44,441 crore by 16%. PFL said the calculation uses contractual ALM for wholesale exposures and behavioural ALM for the retail portfolio.

PFL's consolidated liquidity coverage ratio, or LCR, was 553% at September 2026, compared with the 100% regulatory requirement for non-banking financial companies. The period-end LCR had decreased from 928% in March 2026 and 702% in September 2025. Separately, PFL reported a Q2 FY27 consolidated LCR of 442% on a period-average basis.

How does PFL's funding cost fit its FY27 targets?

PFL's cost of funds was 6.21% of assets under management, or AUM, in Q2 FY27, down from 6.48% in Q2 FY26. Cost of borrowings is measured as a percentage of debt, whereas cost of funds is reported as a percentage of AUM. Total income was 13.0% of AUM in Q2 FY27, compared with 13.4% a year earlier, and net income margin was 6.8%, compared with 6.9%.

Operating expenses fell to 3.2% of AUM in Q2 FY27 from 3.6% in Q2 FY26, while pre-provision operating profit increased to 3.5% from 3.3%. Credit cost declined to 1.5% from 1.7%, and return on AUM rose to 2.0% from 1.7%. Management's FY27 target is an exit-quarter return on AUM of about 2.5%, alongside about 25% year-on-year total AUM growth and about 50% consolidated profit after tax growth.

Conclusion

PFL's disclosures show that its 8.46% H1 FY27 cost for new long-term debt was below the 9.08% and 9.07% costs of liabilities maturing in H2 FY27 and FY28. The lower incremental rate coincided with rating actions, while the stock borrowing cost declined from 8.84% in Q4 FY26 to 8.79% in Q2 FY27. Its September 2026 funding profile also included 39% fixed-rate borrowings, positive ALM gaps and a 553% period-end LCR.

The next disclosed measures to watch are the cost of future debt raised against the 9.08% H2 FY27 and 9.07% FY28 maturity costs, as refinancing proceeds. Management has set a Q4 FY27 return-on-AUM target of about 2.5%, compared with 2.0% in Q2 FY27, making subsequent funding cost, total income and credit-cost disclosures relevant to that stated target.