Piramal Finance Ltd Upgraded to Buy by MarketsMOJO on Strong Financial and Valuation Metrics

Quality Grade Improvement Drives Upgrade

The primary catalyst behind the upgrade is the improvement in Piramal Finance’s quality grade, which has risen from below average to average. This shift is underpinned by several fundamental factors. Over the past five years, the company has recorded a modest sales growth of 2.91% annually, while its EBIT growth has been robust at 20.99% per annum. Although the sales growth remains subdued, the strong earnings before interest and tax expansion indicates operational efficiency gains and better profitability management.

On the balance sheet front, the average net debt to equity ratio stands at 2.84, reflecting a leveraged but manageable capital structure typical for the housing finance sector. Institutional holding remains healthy at 29.57%, signalling sustained interest from large investors. However, the average return on equity (ROE) remains low at 2.51%, highlighting some concerns about the company’s ability to generate shareholder returns relative to equity employed.

Despite the modest ROE, the overall quality upgrade to average reflects a more stable and improving business profile, which has been recognised by the rating agencies and analysts alike.

Valuation Context: Expensive Yet Discounted

Piramal Finance’s valuation remains a mixed picture. The stock currently trades at ₹1,795, close to its 52-week high of ₹1,955, with a price-to-book value ratio of approximately 1.5. This indicates a relatively expensive valuation compared to historical averages and some peers. However, the stock is trading at a discount relative to its peer group’s average historical valuations, suggesting some value remains for investors willing to look beyond headline multiples.

The company’s valuation is supported by its recent earnings momentum and improving fundamentals, which justify a premium to book value. Investors should note that while the valuation is on the higher side, it is not excessive given the growth prospects and recent financial performance.

Financial Trend: Exceptional Quarterly Growth

The financial trend for Piramal Finance has been very positive, particularly in the recent quarter Q3 FY25-26. The company reported a spectacular net profit growth of 963.92%, with profit after tax (PAT) reaching ₹400.17 crores, a staggering increase of 937.8% compared to the previous corresponding quarter. Profit before tax excluding other income (PBT less OI) surged by 630.04% to ₹270.48 crores, while net sales hit a record high of ₹2,917.68 crores.

This strong quarterly performance marks the second consecutive quarter of positive results, signalling a turnaround in operational performance and profitability. Such growth rates are exceptional in the housing finance sector and have been a key driver behind the upgrade in the investment rating.

However, it is important to balance this short-term success with the company’s longer-term fundamentals. Despite the recent surge in profits, the company’s long-term sales growth remains modest at 2.91% annually, and the average ROE is still low at 2.51%. This suggests that while the company is currently benefiting from favourable conditions or operational improvements, sustainable long-term growth remains a challenge.

Technicals and Market Performance

From a technical perspective, Piramal Finance’s stock price has shown resilience and relative strength. The stock closed at ₹1,795 on 28 Jan 2026, up 0.77% on the day, with intraday highs reaching ₹1,798. Over the past month, the stock has delivered a strong return of 9.79%, significantly outperforming the Sensex, which declined by 3.17% over the same period. Year-to-date, the stock has gained 9.43%, while the Sensex has fallen 3.37%.

Longer-term returns are even more impressive. Over five years, Piramal Finance has generated a phenomenal return of 7,538.3%, vastly outpacing the Sensex’s 75.67% gain. This extraordinary performance highlights the stock’s potential for wealth creation despite some fundamental concerns.

Technically, the stock remains in an uptrend, supported by strong volume and positive momentum indicators. The recent upgrade to Buy is likely to attract further investor interest, potentially sustaining the upward price trajectory.

Balancing Strengths and Risks

While the upgrade to Buy reflects improved quality, strong recent financial results, and positive technical signals, investors should remain mindful of certain risks. The company’s long-term fundamental strength is still weak, as evidenced by the low average ROE of 2.51% and modest sales growth of 2.91% over five years. These metrics suggest that the company faces challenges in generating consistent returns and expanding its top line sustainably.

Moreover, the relatively high leverage with a net debt to equity ratio of 2.84 warrants caution, especially in a sector sensitive to interest rate fluctuations and credit cycles. Valuation, though discounted relative to peers, remains on the expensive side with a price-to-book ratio of 1.5, which could limit upside if growth disappoints.

Nonetheless, the recent surge in profitability and the company’s ability to deliver consecutive quarters of positive results provide a strong foundation for the upgraded rating. Investors with a medium to long-term horizon may find the stock attractive given its potential for capital appreciation and improving fundamentals.

Conclusion: Upgrade Reflects Renewed Confidence

The upgrade of Piramal Finance Ltd’s investment rating from Hold to Buy by MarketsMOJO on 28 Jan 2026 is a reflection of the company’s improved quality grade, robust quarterly financial performance, attractive relative valuation, and positive technical momentum. Despite some lingering concerns around long-term growth and return on equity, the stock’s recent earnings surge and market outperformance justify the more optimistic outlook.

Investors should consider the stock’s strong historical returns, current valuation context, and the company’s operational turnaround when making investment decisions. The upgrade signals renewed confidence in Piramal Finance’s ability to deliver shareholder value in the near to medium term, making it a compelling addition to portfolios focused on the housing finance sector.

Upgrade at special rates, valid only for the next few days. Claim Your Special Rate →