PIEL expects to deliver 2-3% higher ROE in the financial services business driven by benefits from its subsidiaries’ mergers. In the financial services business, banks (57%), mutual funds (32%) and insurance companies (8%) are the largest sources of funding. Around 1/3rd of the borrowing is short-tenured and a mix between floating and fixed rate borrowing is largely equal. From an Asset Liability Management (ALM) perspective, ~90% (largely unchanged YoY) of liabilities mature within three years, while ~58% (~70% in FY17) of assets mature during the same period.
PIEL has the distinction of being one of the few companies in India to generate 25%+ book value CAGR over the past 25+ years. We believe the company has it in its DNA to incubate and grow the businesses in niche segments. We believe there is a long runway to cross in the financial services business. Reiterate Buy with a TP of INR3,685 (September-2020 SOTP based).