Trying to grow retail lending; keen on shifting to more longer-term borrowing: Jairam Sridharan, CEO, Piramal Retail Finance

Jairam Sridharan, CEO, Piramal Retail Finance

By Ankur Mishra

Piramal Capital and Housing Finance (PCHFL) wants to have adequate buffers in terms of long-term financing. The company, which has come up with NCD issue of Rs 1,000 crore on July 12, 2021, is a step towards the direction of switching to longer-term borrowing, says Jairam Sridharan, CEO, Piramal Retail Finance to Ankur Mishra in an interview. He also says merger with DHFL is likely to be completed in the next two months, subject to legal outcome of the pending appeals at the court. Edited excerpts:

What is the purpose of the NCD issue?
We have been trying to grow our retail lending business for a while. As we start growing and start pressing our accelerators, we want to make sure we have adequate buffers in terms of long-term financing. We will want to change our profile towards more and more longer-term borrowing. So, that is the direction as far as this issue is concerned.

What is the overall capital raising plan for FY22
We have not sought approval of any kind from the board for annual fund raising. What we will continue to do is that we will watch the market. If we find the time is appropriate, there is a need to improve the amount of long-term borrowing we have, we may come into the market. So, it will be more opportunistic. However, as such there is no need to tap the market. Right now, we have not chosen anything particular for a full-year plan.

Has there been a change in business strategy after the second wave of Covid-19?
The second wave of Covid-19 had much larger impact in terms of health, but I would say in terms of wealth its impact has been significantly small, compared to the last year. Although, quarterly numbers are still to be out, but unlike the first wave, the situation is a lot different right now. If you look at your local kirana store, local grocery guy, they were all making zero revenue during the first wave, but right now none of them are making zero revenue.

As everyone is open for a little while or they have figured out a delivery-based mechanism or UPI mechanism, so that they are able to keep their business running. All lenders have taken a strong stance suspecting possible losses due to Covid-19, and have made big provisions. What you have seen over past one year is that not much provisions have been used.

The actual losses have been lesser than what people had anticipated. So, we are not changing any business strategy. We will continue to be a secured-focussed lender. Due to the second wave, we are seeing what type of customers are vulnerable, and for someone like us this learning is important. This learning will help us in underwriting.

How much impact do you see in the June quarter (Q1) due to the second wave of Covid-19?
I cannot comment on Q1 because we are in the silent period, but I generally say that the second wave has been much shorter. So, for the financial services sector as a whole, the bounce back has been much sharper and quicker than the first Covid wave.

By when do you expect DHFL merger to be closed?
The important approvals are already done. The most important approval was from NCLT, which was received in June. We get three months to close the transaction after NCLT approval and one month is already gone. So, over the next two months, hopefully, everything will be done. However, it is hard to be definitive subject to legal outcome due to various appeals at the court.

Of the total loan book of Rs 44,668 crore, wholesale lending remained at Rs 39,365 crore till March 2021. After DHFL merger, what is your target of retail and wholesale mix?
In the medium-term, we want to be two-third retail out of the total loan book. Our belief is that with the acquisition of DHFL, as and when it gets consummated, our retail portion is likely to be 40% and may touch around 50% by the end of this year.

In the long run, do you want to convert DHFL merged entity into a bank?
I think, the combined lending entity is likely to be in the range of Rs 60,000 crore in terms of the size of balance sheet. It will be a very large entity. However, there is still a headroom for the entity to grow in the NBFC format.

But, in general, it is right that to reach to a certain scale, the ability in the liability side is important. So, to that extent we will be keenly awaiting the results of the recommendations of the internal working group of RBI, and see what are the chances that the regulator later comes up with, in terms of granting bank licences. We are watching it very closely and will take appropriate action at the right time.