Piramal reduces lending to realty developers, looks to derisk its portfolio

Piramal Enterprises, one of the most aggressive lenders to real estate developers, is reducing its exposure to property sector as it looks to derisk its portfolio and scale up non-real estate book.

The share of real estate in its loan book has come down from 85 per cent in September quarter of FY17 to about 74 per cent in the same quarter this financial year, according to the latest presentation of the company. It expects the share of real estate to fall to 50 per cent in the next two years as the share of other sectors grow.

Piramal had a loan book of Rs 527.93 billion in Q2FY19. Its corporate finance division has a loan book of Rs 100 billion or 22 per cent of total loans and is expected to gain share. 

CHANGING TIMES

• Company had a loan book of Rs 527.93 bn in Q2FY19
   
• Share of real estate down from 85 per cent in Q2FY17 to 74 per cent in Q2FY19, expected to fall to 50 per cent in two years 
   
• Corporate finance has a loan book of Rs 100 bn or 22 per cent of loans
   
• Share of mezzanine financing falls to 20 per cent in Q2 this fiscal year from 38 per cent in Q2FY17

Source: Company presentation

“We have followed a conscious and sustained path to diversify the asset base even as the scale of business increased and added granularity to the loan book through a foray into retail housing finance within real estate. For the non-real estate book, an increase in the sectors covered by CFG as well as a focus on mid-market corporate through the emerging corporate lending vertical,” said Khushru Jijina, managing director, Piramal Capital & Housing Finance. Within a short span, the company has expanded the scope of the corporate finance platform in many ways, Jijina said. 

“We are now a sector-agnostic platform and offer various products across the yield curve ranging 10-18 per cent. Our asset portfolio is now diversified into multiple sectors viz. cement, logistics, auto ancillary, entertainment, packaging,” he said.

Even within the real estate lending segment, Piramal is reducing the share of mezzanine financing, which is a hybrid of debt and equity and perceived riskier compared to other structures. 

The share of mezzanine financing has come down from 38 per cent in Q2FY17 to 20 per cent in Q2FY19, the presentation said. About 70 per cent of real estate book is construction finance.  Within its real estate lending business, Piramal has stated lending to hospitality, affordable housing and an increasing exposure to lease rental discounting for commercial real estate.