With DHFL buy, Piramal Capital to bring retail loan share to 75% from 11%

Another reason it is acquiring Dewan Housing Finance is to reduce its wholesale lending operations

Piramal Capital plans to rapidly scale up the share of its retail loan book and bring down wholesale lending, part of the reason why it is acquiring Dewan Housing Finance.

Piramal’s total lending book as of now is around Rs 45,000 crore, in which retail is about Rs 5,000 crore, or just about 11 per cent. According to Jairam Sridharan, Chief Executive Officer, Piramal Retail Finance, the plan is to bring up the retail portion to the mid-40 per cent level by the end of this financial year.  In the medium term, retail should be around two-third and the wholesale book would be around one-third.  

Piramal Retail Finance launched its expanded multi-product retail financing platform focused on small and mid-town India. Through this platform, it will offer affordable and ‘mass affluent’ housing loans, housing loans, loans against property, secured small business Loans, purchase finance, unsecured loans, and used-car loans. In the near term, it will also launch education loans and two-wheeler financing.

DHFL, when it is integrated in the group, will be part of the retail lending arm and the name of the firm would likely be changed.

“Our business will be very mortgage heavy when DHFL comes. So we are launching the non-mortgage products now so that we can cross-sell them effectively,” said Sridharan in an interaction with the media. The DHFL acquisition is pending clearance by the Insolvency courts.

Sridharan said news popping out about frauds in DHFL is nothing new, and haS been flagged already by the forensic audit done by Grant Thornton.

“We have no anxieties and concerns on that front. Whatever new reports of fraud are coming out in media have actually been found and flagged already. There is no new surprise on that front,” Sridharan said.

Piramal Retail has partnered with fintech companies such as CARS24, ZestMoney and Indian Mortgage Guarantee Corporation to expand its business. It doubled its employee base from 500 to 1,000 in FY21, and will double it again in FY22. By June, it will be present in 64 locations. The firm plans Rs 3,000 cr of new loan originations organically in the next 12 months, in addition to inorganic growth.

The target group is people in mid-tier cities, which is about 1,000 cities. It will do both secured and unsecured cash flow-based lending and will bank heavily on artificial intelligence and machine learning to come to a centralized lending decision.

Sridharan said while other firms have suffered setbacks in the segments that Piramal plans to expand its business, it is the best time to enter.

“This is the rock bottom, and we sense a great opportunity now as others are vacating. From a new business perspective, entering when the the situation is bad is always better than entering when everything looks good and underwriting standards get compromised and there is intense competition,” Sridharan said.

The asset quality pressure will continue for some more time for the firm and the industry, but it is better than the third quarter. The asset quality health has not reached the pre-pandemic level but the second surge could put a spanner if it continues for one or two more months, he said.