A year ago, AK Purwar, former chairman, SBI, had enough time to spare when he was heading private equity business of Piramal Group. Today, he is busy person as he is at the helm of Piramal Capital, the holding company which runs entire finance business of Ajay Piramal Group.
Purwar, after six long years of association with Piramal Group, has been given additional charges of NBFCs (under PHL Finance), besides PE. Purwar, who joined with Piramal Group in September 2006, remains excited about the idea of lending in unique areas -- education and medical equipments and devices. Though the group has its expertise in real estate -- one of the three verticals of NBFC, Purwar is working hard to establish a strong presence in other two verticals -- education related infrastructure and medical equipment & devices.
He says, "For future growth of the country, there is more investment needed in education and healthcare sectors. We believe that India has Rs 50,000-crore market for education-related infrastructure." Also, for an investor, both the sectors are recession-proof and there will be no major impact due to market volatilities, he added.
Piramal Finance has invested about Rs 63 crore in Pune-based education group- JSPM which runs about 35 institutes across Maharshtra. According to Purwar, 3 more investments - 1 in Madhya Pradesh and 2 in Maharashtra - worth Rs 120 crore - is in pipeline. Piramal Finance is expected to invest about Rs 350 crore in education space by March 2013.
According to a study by consulting firm Technopak, private education sector in India is estimated to reach $70 billion by 2013 and $115 billion by 2018, from $60 billion in 2011. The Indian private spend on education in 2011 was estimated to be over $60 billion across all segments (Schooling, Higher Education, Vocational and Ancillary) or approximately equal to 3 per cent of our GDP, said the Technopak study.
Rajeev Suneja, partner-financial services, Ernst & Young, said, "NBFCs in certain areas are more competitive compared to banks such as loans in rural or remote areas, or wherever due to regulatory reasons banks have limitation of funding such as loan against shares, real estate financing etc."
Piramal Finance's healthcare vertical will take off by March 2013. "Our NBFC business is in process of settling down and when we reach in a comfort level, we will start the medical equipments vertical. We hope the launch will happen by March 2013," said Sudha Ravi, head of PHL Finance.
In last October, Piramal Group had appointed Sudha Ravi as head of PHL Finance. Previously, Sudha Ravi managed the Washington operations of State Bank of India.
As per a report by FICCI, medical devices and equipment industry, valued at $2.5 billion contributes only 6 per cent of India’s $40 billion healthcare sector. "Moreover, it is growing at a faster annual rate of 15 per cent than 10-12 per cent growth seen in the healthcare sector in its entirety. A rise in the number of hospitals and the increased requirement for healthcare facilities creates a need for sophisticated devices and equipment," said the FICCI report.
PHL Finance has disbursed loan worth more than Rs 1,000 crore through its realty vertical. "We are very selective. We look for long-term relationships, whether in realty or in education. We have no restriction over the number of deals or size. What matters is reputation and track record of the builders, "said Sudha Ravi.
For real estate lending, PHL Finance has its focus on 4 cities - Mumbai, Pune, bangalore and Chennai. We are also considering at other cities like Coimabtore, she added.
PHL Finance which plans to have a lending of Rs 1,600 crore by March is expected to touch Rs 5000-crore mark by 2016, Purwar hopes.
Experts believe that the limitations of banks for distributing loans will also give a high hand to NBFCs in certain areas. "Banks being more regulated compared to NBFCs, having relatively higher per-employee cost and higher cost per branch, are relatively less competitive compared to NBFC. Also, collection efficiency of these NBFCS is typically better than banks for the kind of portfolios they have," Suneja added.