Ajay Piramal bets big on financial services

Billionaire Ajay Piramal is never tired of reinventing his businesses. After selling the domestic formulation business to Abbott at Rs 17,500 crore in 2010, he has been rebuilding the flagship, Piramal Enterprises.

The company, whose revenues were Rs 3,742 crore in the first half of the financial year, got its biggest chunk, 47 per cent, from the health care arm, which is spread over the contract manufacturing, critical care and consumer products businesses.

 The other two arms — financial services and information management — contributed 39 per cent and 14 per cent, respectively.

But this is set to change. Piramal said in his recent interview to Business Standard that he expected financial services to provide the maximum value in the next three-five years. Piramal’s financial services business is popular among Tier I developers and its lending of about Rs 19,170 crore is largely to them. It has additional assets of Rs 7,315 crore, again primarily given to real estate. 

“Our plan this year is to scale up through providing mid-ticket loans to corporate and mid-income retail consumers,” said Khushru Jijina, managing director of Piramal Finance. The company is planning to launch its housing finance business in four months and it will target tier II customers who are self-employed. He is also planning to tap affordable housing projects.  It is doing business with 100 developers in 200 projects. 

“We will diversify into new business segments for wholesale businesses for giving mid-ticket loans,” said Jijina. 

Retail LAP (loan against property), SME lending, and construction finance below Rs 50 crore are the new segments Jijina is targeting. 

The business unit has formed a platform called the Emerging Corporate Loan Group, which will lend to small and medium enterprises (SMEs) across sectors. The Piramal group has consolidated its financial services business under the subsidiary Piramal Finance. "There are a lot of opportunities below Rs 100 crore, which require a specialised approach and this is our way of diversifying into a market which has until recently been relatively untapped," he said. The group came up with the Preferred Partner programme with a corpus of Rs 15,000 crore earlier. 

It has distributed 60% of this corpus, which provides flexibility to developers in using funds. It has given credit worth more than Rs 1,000 crore to eight developers under the first phase of the programme.

The company recently launched flexi LRD product and has committed itself to three deals of more than Rs 1,500 crore. It is likely to sanction another transaction this month. 

After demonetisation, Jijina said the company reassessed its existing deals to enable borrowers to complete their projects. The company plans to offer a product to their borrowers which will help them tide over anticipated restrictions in the RERA (Real Estate Regulation & Development Act) regime.