Piramal Enterprises plans to double its loan book by FY28, with close to 70% of the portfolio comprising retail loans, said its chairman, Ajay Piramal. In an interview to ET’s Deborshi Chaki, he said as part of the growth strategy, the company plans to reduce the ticket size of its wholesale book, lend to mid-sized corporates and exit its legacy wholesale book. Edited excerpts:
What is Piramal Finance 2.0 going to look like ?
In the lending business, the investments that we have made since the DHFL takeover in retail are both physical and technological. The growth will come significantly in retail through secured as well as unsecured lending. When we acquired DHFL, wholesale business comprised 95% and retail was 5% of our lending books. Today, as we speak, the bifurcation is 55% retail and 45% wholesale. Going forward, our stated objective is to have two-thirds retail and one-third wholesale. We are looking to double our book by FY28 to about ‘1.2-1.3 lakh crore. We call our legacy wholesale book Wholesale 1.0. The Wholesale 1.0 book in March 2022 was ‘43,000 crore, which has come down to ‘26,000 crore as of June 2023. At the same time, we are also creating a new wholesale book we call Wholesale 2.0.
How will the new loan book be different from the legacy book?
The new book is going to be very different from the old book. It will be much more granular, including the size of the loans that we will give out. Today the average loan size in real estate is only ‘165 crore and the average size of loan in corporate lending in mid-market is about ’60 crore. Therefore, you can see the big difference. The second point is that the new book is not structured. It’s all either based on interest and repayments that will be made under regular repayments or cash-flow backed.
As things stand, bank loans are difficult to get below a certain investment. Do you see an opportunity here?
It is true that banks are now hesitant to lend to anything below AA. But if India needs to grow, it is the BBB-rated SMEs and MSMEs (micro, small and medium enterprises) which are really going to fuel the growth. Therefore, there is a vacuum that we are filling up as far as the loans are concerned. We already have adequate resources to reach the target segments.
What will be your capital infusion plan for this business?
We do not need capital for the next five years. Today, our equity net worth is about ‘31,000 crore and we are the third-largest private NBFC (non-banking financial company) in terms of net worth size. The debt equity is about 1.2 times. So, we don’t need new capital for the next four to five years and will be doubling our business with the existing capital.
What is the growth strategy on the retail side of the business?
Ours is a high-touch and a high-tech model of lending, which means that we are in lending, secured or unsecured, in tier-2 and tier-3 cities. We are going to those places where banks do not want to go. High touch means that we now have 13,500 people in the financial services business working across the markets where we operate. Many of these borrowers are first-time borrowers and many of them did not even imagine that they could get a loan. When the person comes to us as a borrower, we use technology in many ways to assess credit worthiness through our own proprietary model. Our Innovation Hub in Bengaluru has more than 300 employees with expertise in artificial intelligence and machine learning.
