Trying to develop retail loans; keen to switch to longer term borrowing: Jairam Sridharan, CEO, Piramal Retail Finance

Jairam Sridharan, CEO, Piramal Retail Finance

By Ankur Mishra

Piramal Capital and Housing Finance (PCHFL) wishes to have adequate cushions in terms of long-term financing. The company, which proposed a Rs 1,000 crore NCD issue on July 12, 2021, is a step towards shifting to longer-term borrowing, said Jairam Sridharan, CEO of Piramal Retail Finance at Ankur Mishra in a statement. interview. He also says the merger with DHFL is expected to be completed within the next two months, subject to the judicial outcome of the pending appeals in court. Edited excerpts:

What is the goal of the NCD problem?
We have been trying to develop our personal credit business for some time. As we start to grow and build on our accelerators, we want to make sure we have adequate reserves in terms of long-term funding. We will want to change our profile towards more and more longer-term loans. So that’s the direction in regards to this issue.

What is the overall fundraising plan for fiscal year 22
We did not seek any board approval for an annual fundraiser. What we will continue to do is monitor the market. If we find the timing is right, it is necessary to improve the amount of long term borrowing that we have, we can enter the market. It will therefore be more opportunistic. However, as such, there is no need to tap into the market. So far, we haven’t chosen anything specific for an annual plan.

Has there been a change in business strategy after the second wave of Covid-19?
The second wave of Covid-19 had a much bigger impact in terms of health, but I would say that in terms of wealth, its impact was significantly small, compared to last year. Although the quarterly figures are not yet released, but unlike the first wave, the situation is very different at the moment. If you look at your local kirana store, your local grocery store, they were all making no income in the first wave, but at the moment none of them are making any income.

Like everyone is open for a little while or they’ve come up with a delivery-based mechanism or a UPI mechanism, so they can keep running their business. All the lenders have taken a firm position, suspecting possible losses due to Covid-19, and have taken large provisions. What you have seen over the past year is that few provisions have been used.

The actual losses were lower than people expected. Thus, we do not change any business strategy. We will continue to be a collateral-driven lender. Because of the second wave, we see what kind of customers are vulnerable, and for someone like us, that learning is important. This learning will help us in the subscription.

What impact do you see in the June quarter (Q1) due to the second wave of Covid-19?
I cannot comment on the first trimester as we are in the silent period, but I generally say the second wave was much shorter. So, for the financial services industry as a whole, the rebound has been much sharper and faster than the first wave of Covid.

When do you expect the DHFL merger to be completed?
The major approvals have already been made. The biggest endorsement was from NCLT, which was received in June. We have three months to close the transaction after the approval of the NCLT and one month has already passed. So over the next couple of months hopefully everything will be done. However, it is difficult to be final subject to a judicial outcome due to various appeals in court.

Out of the total loan portfolio of Rs 44,668 crore, wholesale loans remained at Rs 39,365 crore until March 2021. After the DHFL merger, what is your goal of mixing retail and wholesale?
In the medium term, we want to represent two-thirds of the retail trade of the total loan portfolio. Our belief is that with the acquisition of DHFL, as it is consumed, our retail share will likely be 40% and could reach around 50% by the end of this year.

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

But, in general, it is only fair that in order to reach a certain scale, the capacity of the passive side is important. So to that extent, we’ll look forward to the results of the RBI’s internal task force recommendations, and see what the chances the regulator has down the road, in terms of banking licensing. We are monitoring it very closely and will take the appropriate action at the right time.

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