Piramal Finance bets on in-house AI to cut costs, boost efficiency

Piramal Finance has not disclosed its total investment in AI. Sridharan said much of the spending so far has gone into building the team, a process that has been under way for the past few years. With the team largely in place, he expects incremental AI-related costs to remain limited.

Use cases include loan underwriting, retail disbursements, customer complaints, branch and employee productivity, and software development. According to the company's investor presentation, AI now writes 57% of the business' overall code.

Over the past year, Piramal Finance's AI usage has increased fivefold, helping drive a 60 basis points decline in operating expenditure, Sridharan said.

Operating expenditure (opex) as a percentage of assets under management (AUM) stood at 3.3% in April-June (Q1FY27), down from 3.4% in the previous quarter and 3.9% a year earlier. Retail opex-to-AUM declined 10 basis points sequentially and 66 basis points year-on-year to 3.5%. The cost-to-income ratio fell to 53% from 66% in the year-ago quarter.

“These are obviously fairly related. The more AI we use, the more we are able to do with the same kind of staff and the same process,” he said, adding that it also means that the workforce is getting more efficient.

Piramal Finance's AUM grew 25% year-on-year and 6% sequentially to ₹1.1 trillion at the end of June.

No layoffs

Sridharan, however, is cognizant of the workforce implications of AI, with several large banks reportedly cutting jobs as AI is integrated into business processes. He said Piramal Finance is unlikely to follow suit.

“We are a growth company, our business is growing pretty strongly and even if people get more and more efficient, I still expect us to need more people in the future and not less. So, it's highly unlikely that you will see a layoff situation because of AI,” he said.

AI and technology are key structural enablers of growth and productivity for Piramal Finance, Emkay Global Financial said in a post-earnings note. Gen-AI token volumes rose to 320 billion in Q1FY27 from 63 billion a year earlier, while token costs remained flat as the lender shifted to homegrown small language models and open-source models. The company has also launched an AI-powered investor assistant, Pia.

“The integration of AI tools has significantly advanced credit underwriting, driving a 50% increase in credit staff productivity over the last two years,” the note said.

Disbursements per branch rose 23% year-on-year to ₹87 crore in the quarter, while disbursements per employee increased 16% to ₹2.9 crore.

Piramal Finance reported a consolidated net profit of ₹461 crore in Q1FY27, up 67% year-on-year but down from ₹502 crore in the previous quarter. Net interest income rose 43% year-on-year and 6% sequentially to ₹1,442 crore. Net interest margin was 6.8%, up 47 basis points year-on-year and flat sequentially.

The company reported its results after market hours on Thursday. Its stock ended 1.9% lower at ₹2,144.30 on the National Stock Exchange on Friday.

Sridharan said he remains comfortable with the margin trajectory despite volatility in debt markets and elevated money-market rates.

“Things were very tight. So, in light of that, we were still able to show a lower cost of borrowing,” he said, adding that he is “not worried about margins and that they should be stable or move upwards hereon.”

Cost of borrowing declined 33 basis points year-on-year and 4 basis points sequentially to 8.8%.

While he did not provide FY27 margin guidance, Sridharan expects return on assets (RoA) to rise to 2.5% this year from 2.0% in FY26. RoA was 1.9% in Q1.

Operating leverage will remain a key driver of RoA improvement as AUM growth outpaces operating-expense growth, Motilal Oswal Securities said in a note. The brokerage expects the opex-to-AUM ratio to improve by 40-50 basis points over the next four to five quarters, helped by scale.

“This, along with an improving business mix and lower cost of borrowing (also aided by its recent credit rating upgrade), is expected to drive RoA expansion to 2.5% by Q4 FY27,” it added.

Growth capital

Piramal Finance's board on Thursday approved raising up to ₹4,000 crore of equity capital during the year. Sridharan said the money will be used to fund growth, with the timing and quantum of the issue to be decided later.

“We are growing very fast, upwards of 25%. So, we run through equity pretty quickly,” he said, adding that the objective is to maintain adequate capital to sustain this growth. “We will not allow capital adequacy to fall below 18%, so that makes it incumbent on us to start looking for equity.”

The company's capital adequacy ratio stood at 18.9% at the end of June, against a regulatory requirement of 15%.

Piramal Finance continues to rely on retail lending, particularly loans against property, unsecured loans and digital lending, to drive growth. Housing loans, however, are slowing amid muted demand.

Wholesale lending remains challenging despite decent growth in Q1, Sridharan said, citing weak demand and high repayment rates.

“We are still in the business where corporates are not borrowing that much because they are all flush with money, and whoever is borrowing is actually repaying it very quickly. So, growing a book there is continuing to be quite a challenge,” he said.

Retail assets rose 32% year-on-year to ₹91,249 crore and accounted for 85% of total AUM. Wholesale assets rose 27% to ₹13,238 crore as of 30 June 2026.