Piramal Finance, part of the Ajay Piramal-led group that also has interests in pharmaceuticals and real estate, had a strong debut on the stock exchanges on Friday, with the stock hitting the 5 per cent upper circuit limit. The company, which has grown rapidly over the last few years, will continue its retail-focused push and will also continue to look at acquisitions as it looks at its next phase of growth, according to a top official.
Piramal Finance was earlier a subsidiary of Piramal Enterprises. In September, the National Company Law Tribunal had approved the merger of Piramal Enterprises with its non-banking financial services arm, Piramal Finance.
Following that merger, Piramal Enterprises ceased trading on the stock exchange in September. The company relisted on Friday as Piramal Finance, with the stock listing at a 12 per cent premium. It opened at Rs 1,270 on the BSE and traded at the 5 per cent upper circuit limit at Rs 1,333.45.
Subsequent to the merger, Anand Piramal took over the role of chairman of Piramal Finance, while Ajay Piramal continues to chair the Piramal Group.
AUM and growth
Piramal Finance has seen strong growth in the last few years, with its assets under management (AUM) expanding four times in the past four years to over Rs 90,000 crore, serving more than 5.2 million customers, through 517 branches across the country. A key driver of this rapid growth was the acquisition of DHFL through the insolvency process.
Piramal Finance had acquired the bankrupt DHFL in 2021 for Rs 34,250 crore, in what was the first successful resolution under the Insolvency and Bankruptcy Code (IBC) for a financial services company.
At that time, wholesale lending had accounted for much of the business. Over the last few years, the company has pivoted towards being a retail-focused NBFC.
“In just four years, Piramal Finance has pivoted from a wholesale lender to a retail-focused, technology-led institution. Our purpose is clear: to make financial access easier, dependable and transparent for millions,” said Anand Piramal.
The company is targeting to grow its AUM to Rs 1.5 lakh crore by the financial year 2028. Jairam Sridharan, the MD and CEO of Piramal Finance, told THE WEEK that retail lending would be the main engine driving this growth.
“We want to basically be at 80-20 or 85-15 in terms of retail versus wholesale business, which is kind of where we are today. We used to be at a place where wholesale was 95 per cent,” said Sridharan.
The retail business has seen strong growth, especially in the past few months, driven by a festive season consumption boom driven by the Goods and Services Tax Cuts effective September 22, coupled with the income tax relief announced in the Budget and the reduction in interest rates by the Reserve Bank.
“If you look at the Diwali Dussehra period and compare it with last year, our festive season growth has been 45 per cent. It has been crazy, the level of impetus, particularly this GST thing, has done in this time,” said Sridharan.
Piramal Finance focuses a lot on semi-urban or what Sridharan calls ‘middle India markets’, compared with urban or metro markets, where the larger banks and AAA-rated NBFCs already have a strong base.
“That (semi-urban) is where we have found a good product market fit, what we can offer and what the customers are looking for,” he said.
Sridharan also noted that close to 65 per cent of its customers are self-employed. It even lends to the underserved or those who may have been rejected by banks for various reasons, like low income or limited paperwork. Of course, it does involve a lot more due diligence and groundwork, and the interest rates that it charges in such instances are also slightly higher.
“You need to build a margin of safety in your product to make sure that your lack of confidence and that lack of paperwork, you are adequately able to protect yourself on a statistical basis. But, you are still making credit available to that customer who was otherwise not getting it,” noted Sridharan.
Retail and wholesale lending
While retail will be the biggest chunk of its business, it hopes to continue wholesale lending.
“Right now, corporate India is not borrowing. Everybody is just raising money from the equity market, but that trend will change. Today, almost no NBFC is doing corporate lending business, except for maybe three. We think we can be a fourth alternative in that space, particularly for clients who are in the BBB type of family. Banks typically want to lend to A or B (credit rating) customers; we think we can offer something to that kind of mid-corporates,” said Sridharan.
Piramal Finance will also continue to fund real estate projects, but will be selective and not take massive exposures here.
“A lot of players have gone away from this business. So, a lot of supply has gone, but the demand is still there. We are in the smaller-ticket of real estate lending. Our average ticket size in real estate today is about Rs 160-170 crore, so we are not doing massive projects and not taking very big exposures,” explained Sridharan.
The DHFL acquisition gave Piramal Finance a growth boost four years ago. As it looks ahead, the company remains open to more acquisitions.
“Piramal Group has always been very strong in M&A, and we will continue to be interested in doing M&A in areas like microfinance, small business lending, affordable housing, gold loans... These are areas where if we find there is a good match of values and there is a meeting of minds and valuation, we would be more than happy to do acquisitions,” Sridharan stated.