Piramal Group Expands Further Into India’s Crowded Retail Lending Market

Eventually, retail loans could make up two-thirds of the Piramal Group loan book.

Billionaire Ajay Piramal, chairman of Piramal Group during an interview in Mumbai, India. Photographer: Dhiraj Singh/Bloomberg 
Billionaire Ajay Piramal, chairman of Piramal Group during an interview in Mumbai, India. Photographer: Dhiraj Singh/Bloomberg 

The Piramal Group will offer a wider set of retail lending products through tie-ups as it seeks to rebalance its business away from wholesale loans.

Piramal Retail Finance, a group company which will hold all retail lending businesses, will enter segments such as digital personal finance, used car loans and secured lending to small businesses, Jairam Sridharan, chief executive officer for the unit said at a press briefing on Thursday.

Piramal Retail Finance will provide used car financing through a tie-up with Cars24 — a digital portal for purchase of such vehicles. It has also tied up with ZestMoney for consumer durable financing. Another tie-up with India Mortgage Guarantee Corporation is aimed at expanding affordable housing.

Piramal Retail Finance is aiming for Rs 3,000 crore in new loan originations in the next 12 months. From Rs 17 crore in October, new monthly retail loan disbursements have risen to Rs 87 crore in December, the company said. The yield on these new retail loans are about 200 basis points higher than the existing book.

The company’s suite of retail loan products has expanded to seven, with another five products to be added during the current year. To expand its retail business, the company has increased its headcount to 1,000 from 500 before.

We will be looking to start two-wheeler financing and education loans in the next 12 months. We are working on a loans-against-shares product as well. We will also grow unsecured and multi-collateral lending products for small businesses.
Jairam Sridharan, CEO, Piramal Retail Finance

As on Dec. 31, 2020, Piramal Group’s outstanding loan book stood at Rs 46,370 crore, which included wholesale loans worth Rs 41,060 crore, according to a presentation available on the group’s website. Non-performing assets, or those classified as stage-3 under Ind-AS accounting rules, stood at 3.7%.

The DHFL Acquisition

The Piramal Group’s efforts to build a retail loan book will be helped by its recent acquisition of Dewan Housing Finance Corp. under the Insolvency & Bankruptcy Code. DHFL will be folded into Piramal Capital & Housing Finance Ltd. once the acquisition is complete.

So far, lenders to DHFL, the Reserve Bank of India and the Competition Commission have approved the transaction, while approvals from lenders to Piramal Group, the insurance regulator and the National Company Law Tribunal are pending.

Once the transaction is complete, Piramal Group’s retail lending business will account for 40% of the total portfolio, said Sridharan, adding that the segment may eventually make up two-thirds of the book with the help of the new retail products.

“The group may further reduce its wholesale loan exposure by selling down DHFL’s loans,” Sridharan said.

The gross wholesale loan book of DHFL stood at Rs 50,805 crore as of June 2020, which is valued at Rs 30,107 crore, according to a presentation available on the housing finance company’s website. Including the retail housing finance business, total loans are in excess of Rs 90,000 crore.

Commenting on the various fraud allegations against DHFL, Sridharan said Piramal Group had been made fully aware of the potential problems during the bidding process.

“There are many legal threats arising from the Grant Thornton investigation into DHFL. Various agencies could pick up these issues and start investigations of their own. However, we were made fully aware of these problems during the bidding process and that reflects in our bid. It is unlikely that there will be any new investigation or finding which will surprise us,” he said.

So far, the Central Bureau of Investigation and the Enforcement Directorate have initiated investigations into alleged fraud in DHFL’s loan book. In March, the CBI had filed a first information report stating that 2.6 lakh fictitious loan accounts were created at DHFL’s Bandra branch to siphon off funds worth Rs 11,755 crore from the company. It has implicated DHFL’s promoters Kapil and Dheeraj Wadhawan, as well as unnamed government officials in the case.

Watch the full interview here: