Why Piramal Enterprises Share Price is Rising

Piramal Enterprises, a renowned name in the Indian finance landscape, recently made waves by selling its entire stake in Shriram Finance.

This move has now propelled its share price higher by over 13%.

Not just Piramal's shares but Shriram Finance share price also scaled new peak today, rallying around 15%.

What's so special about this stake sale that propelled both the companies' share price higher?

Let's find out.

Piramal's Stake Sale in Shriram Finance

According to experts, this strategic divestment marks a significant milestone in Piramal's journey.

In early trade today, shares of Shriram Finance were locked in the 15% upper circuit after Piramal Enterprises sold its entire 8.34% stake via block deals.

The floor price was set at a 5% discount to yesterday's closing price. Considering the price of Rs 1,483, Piramal netted around Rs 46.3 billion (bn).

Back in 2013, Piramal sold its domestic pharmaceutical formulations business to Abbott Laboratories for Rs 170 bn and had invested part of the proceeds in three Shriram Group companies.

It put around Rs 45 bn in the three companies. After around nine years, Piramal seems to have netted the same amount by selling stake in just one company.

US private equity firm TPG had also sold its 2.65% stake in Shriram Finance earlier this week on Monday for Rs 14 bn.

After its merger with Shriram Transport Finance and Shriram City Union Finance, Shriram Finance became the largest NBFC in India.

Piramal Enterprises had reported a loss in its latest quarterly results on the back of mark-to-market (MTM) impact for its investments in Shriram Finance.

After it bought stake in 2013, Piramal had, in April 2014, bought a 20% stake in Shriram Capital, the holding entity for all Shriram Group companies as a strategic investment. But the merger never took off and Piramal had to sell majority of its stake.

What next?

In September last year, we wrote about why Piramal Enterprises was falling.

The company was witnessing promoter selling back then, was on course to report weak quarterly results and its long-awaited merger that took place also failed to enthuse investor sentiment.

While promoter holding has stabilised, foreign investors have started to dump shares at regular intervals. FII holding has come down in the past five consecutive quarters, from 35% in March 2022 to 28.7% as of March 2023.

Meanwhile, Indian mutual funds have turned bullish on the company and have doubled down on the stock. Something was surely brewing that retail investors didn't know of. You can check the detailed shareholding pattern here.

Coming to the financial performance, the company has shown some improvement on the asset quality front in FY23. Piramal Enterprises posted a 21% growth in its net interest income which resulted in a 5% growth in its profit after tax.

The company also declared a dividend of Rs 31 per share subject to shareholder approval at AGM. This will be key monitorable as the firm is set to hold its AGM on 30 June 2023.

Watch out for more details regarding the stake sale in the annual general meeting.

How Piramal Enterprises share price has performed recently

In the past one year, shares of the company have fallen around 40%, owing to the demerger effect that resulted in listing of Piramal Pharma.

On a year to date basis, Piramal Enterprises is up 15%. While in the past five days, Piramal Enterprises has gained 20%.

It has a 52-week high of Rs 2,084 and a 52-week low of Rs 630.5.

About Piramal Enterprises

Piramal Enterprises formerly known as Piramal Healthcare, is the largest company of the Piramal Group.

It's active in business verticals including healthcare, life sciences, information management, and financial services.

For more details about the company, you can have a look at Piramal Enterprises' factsheet and quarterly results on our website.

To know what's moving the Indian stock markets today, check out the most recent share market updates here.

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