The Piramal Group would look to differentiate itself from the crowd by reaching out to potential borrowers in India’s smaller towns and cities, and not shying away from lending to non-salaried customers, group chairman Ajay Piramal told Mint in an interview on Thursday.
“The financial services space has always been crowded and there has always been competition. But in every space, you have to stand out in the competition,” he said.
With the acquisition of Dewan Housing Finance Corp Ltd (DHFL) behind it, the group’s financial services business wants to tap technology to expand its loan book. The retail loan book stood at ₹22,273 crore in September and was a chunky 33% of the overall book of ₹66,986 crore.
“We are trying to increase the proportion of retail loans over a period of time. Today two-third of the book is wholesale and the rest retail. We will increase our retail loans, first to half of the book, and then to two-third of the book,” said Piramal.
He said that that unless the lender ventures into the smaller towns and cities and unless it lends to both non-salaried and salaried people, it would not able to compete. According to Piramal, because it is riskier to lend to non-salaried borrowers, one has to use technology and have better understanding of the market.
That said, he believes that although a riskier proposition, lending to this category of borrowers would result in higher yields and higher margins.
“Let’s say for housing loan. For most people, skew would be towards the salaried class in the larger cities. We are going towards 50:50 salaried and non-salaried, not only in the larger cities but also in the smaller ones,” said Piramal.
On the DHFL merger, he said it took place only on the 30 September and till now the transition has been positive. There has not been any attrition so far among employees of the erstwhile mortgage lender and the Piramal Group has not asked anybody to leave, he said. In September, Piramal Group had said it completed the acquisition of DHFL for ₹34,250 crore. DHFL was the first non-bank lender to be referred to NCLT under new rules notified by the government on 15 November 2019.
“We have rolled out all the new roles and many of erstwhile DHFL employees have got expanded portfolios,” he said.
Asked about additional acquisition opportunities in this space, Piramal said there are many opportunities already on a daily basis but for some time the focus should be on the integration of DHFL. “There is firepower available for us. If you look at it, we have more than enough equity and the debt-to-equity today on a consolidated basis is less than one. Therefore, there are opportunities and if we want, we could do it,” added Piramal.
On the macro front, although he sees a better-than-expected economic rebound and is quite optimistic about growth, inflation concerns persist. Reiterating what the central bank has also been flagging for some time now, Piramal said supply side challenges remain.
“The only red flag I see is that inflation is coming back for sure and on the supply side there are challenges. Overall, the demand is good. In fact, today, the issue is not of demand but how we can meet the demand and therefore financial services being so closely linked to the economy that it should be positive,” he said.
Inflation, measured by the consumer price index (CPI), eased to 4.35% in September from 5.3% in August.
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