Piramal to tap borrowers in smaller towns and cities

“The financial services space has always been crowded, and there has always been competition. But in every space, you have to stand out from the competition," he said in an interview on Thursday.

With the acquisition of Dewan Housing Finance Corp Ltd (DHFL), the group’s financial services business wants to tap technology to expand its loan book. Retail loans stood at ₹22,273 crore as of 30 September and accounted for a third of the overall loan book of ₹66,986 crore.

“We are trying to increase the proportion of retail loans over a period of time. Today, two-thirds of the book is wholesale, and the rest retail. We will increase our retail loans, first to half of the book, and then to two-thirds of the book," Piramal said.

He said that unless the lender ventures into smaller towns and cities and lends to both non-salaried and salaried people, it would not be able to compete. According to Piramal, the group will use technology and understand the customer better because it is riskier to lend to non-salaried borrowers.

He believes that lending to this category of borrowers would result in higher yields and margins.

“Let’s say for a home loan, for most people, the skew would be towards the salaried class in the larger cities. We are going towards 50:50 salaried and non-salaried, not only in the larger cities but also in smaller ones," Piramal said.

On the DHFL merger, he said the transition so far has been positive. There has not been any attrition among employees of the erstwhile mortgage lender, and the Piramal Group has not asked anybody to leave, he said. In September, Piramal Group said it completed the acquisition of DHFL for ₹34,250 crore. DHFL was the first non-bank lender to be referred to the bankruptcy court under new rules notified by the government on 15 November 2019.

“We have rolled out all the new roles, and many erstwhile DHFL employees have got expanded portfolios," he said.

Asked about additional acquisition opportunities in this space, Piramal said there are many opportunities already on a daily basis, but for some time, the focus should be on the integration of DHFL. “There is firepower available for us. If you look at it, we have more than enough equity and the debt-to-equity today on a consolidated basis is less than one. Therefore, there are opportunities, and if we want, we could do it," Piramal added.

On the macro front, Piramal said that inflation remains a concern, although he is witnessing a better-than-expected economic rebound and is optimistic about growth. Reiterating what the central bank has also been flagging for some time now, Piramal said supply-side challenges remain.

“The only red flag I see is that inflation is coming back for sure, and on the supply-side, there are challenges. Overall, the demand is good. In fact, today, the issue is not of demand but how we can meet the demand and, therefore, financial services being so closely linked to the economy that it should be positive," he said.

Inflation, measured by the Consumer Price Index, eased to 4.35% in September from 5.3% in August.