Piramal Finance's retail pivot left legacy loans under 2% of AUM and lifted margins

Piramal Finance spent a multi-year transformation moving off its legacy book and into retail lending. By the June 2026 quarter (Q1 FY27), the growth portfolio made up about 98% of assets under management, retail accounted for roughly 85% of AUM, and the legacy portfolio had fallen to less than 2% - the payoff phase, as ETBFSI Research put it in a note built on Motilal Oswal Financial Services' analysis.

The rebuild leant on a richer product mix: used-car loans yielded 15.5%, salaried personal loans 16.6% and unsecured business loans 18.8%, against 11.7% for housing loans and 12.8% for loans against property. Gold loans became the newest leg - the branch network went from 22 in March 2026 to 67 by June, with about 200 targeted by end-FY27. Cross-selling already contributed 28-29% of business volumes off a base of roughly 6 million customers.

The delivered numbers: consolidated AUM grew about 25% year on year in Q1 FY27 while retail disbursements rose 44% YoY to Rs 12,500 crore. Net interest margin stood at about 6.5%, up around 47 basis points year on year, while borrowing costs ran near 8.8%. Operating expenses grew only ~10% against that 25% AUM growth, cutting the cost-to-income ratio to 52.5% from 65.6% a year earlier; opex-to-AUM fell to 3.5% from 4.9% over eight quarters. Credit costs in growth businesses held at about 1.6%, and the company raised about Rs 2,100 crore of equity through a QIP.

The forward numbers are estimates, not results: Motilal Oswal projects about 55% profit CAGR over FY26-FY28, AUM of roughly Rs 1.6 lakh crore by FY28, NIM rising to 5.4% in FY27 and 5.9% in FY28 (from 4.7% in FY26), and RoA/RoE of 2.8%/11.4% by FY28, on a Buy rating with a Rs 2,480 target price.

Q1 FY27: retail disbursements up 44% YoY to Rs 12,500 crore, AUM up ~25% YoY, NIM about 6.5% (up 47 bps YoY), cost-to-income down to 52.5% from 65.6%.

Yields of 15.5-18.8% on used-car, salaried personal and unsecured business loans far outpace the 11.7-12.8% housing and LAP book, so shifting mix toward them lifts margin without new leverage.

Gold-loan branches went from 22 to 67 in three months of 2026 (~200 targeted by FY27-end), monetizing a base of ~6 million customers where cross-sell is already 28-29% of volumes.

Operating leverage did the rest: AUM grew ~25% YoY in Q1 FY27 while opex rose ~10%, taking cost-to-income from 65.6% to 52.5% and opex-to-AUM from 4.9% to 3.5% over eight quarters.

Underwriting discipline kept credit costs near 1.6% in the growth businesses while the legacy book shrank to under 2% of AUM, so the richer mix flowed to margin instead of losses.

An improved credit rating and diversified, multilateral funding lowered borrowing costs toward 8.8%, supporting the NIM expansion.

A lender's turnaround shows up in mix, margin and cost ratios before it reaches profit - track all three quarter by quarter instead of waiting for the headline number.

Motilal Oswal reiterated Buy with a Rs 2,480 target (~1.3x estimated FY28 price-to-book), projecting 55% profit CAGR and Rs 1.6 lakh crore AUM by FY28; the company targets about 2.5% return on AUM by Q4 FY27, a further 40-50 bps opex-to-AUM improvement over four to six quarters, and expects a primary equity infusion of about Rs 3,850 crore to fund growth. These are projections: the delivered facts so far are the Q1 FY27 volumes, margins and cost ratios.