Only the fittest NBFCs will survive: Ajay Piramal

Livmint
October 27, 2019

In a conversation with Mint, Ajay Piramal, chairman of Piramal group discussed his company's growth plans in the Financial Services and pharmaceutical sectors and the key takeaways from the liquidity crisis that has plagued the NBFC space.Edited excerpts

The NBFC sector has been under stress for the last year. What is your outlook for the sector?

Our belief is that consolidation is taking place in the NBFC sector. Only the fittest NBFC will survive and actually do better, if we believe the story that India will continue to grow. If India's GDP has to grow then financial services has to be an important part. We have seen that NBFCs have to be an important part of this growth story of financial services.

What are the areas that will drive growth for your financial services business going ahead?

We need to be more diversified. So we are focusing on getting a whole retail franchise going, which is consumer lending and housing finance. That is one area of growth. In wholesale lending the demand is good, but how do we ensure that we meet this demand without having too much of concentration. We are now looking at a co-investing model with other banks, where we bring in the knowledge and understanding of underwriting in real estate. Real estate is attractive in terms of yield so banks want to enter but they do not have the wherewithal to underwrite, so they are willing to co-invest with you. And third, because of the stresses in the system you can look at acquiring books or businesses at much lower valuations. If you can get a good quality book, if you find the culture is good then that is another way of growing. If you have adequate capital in a turbulent time then there are many opportunities for growth.

What is your key takeaway from this episode of liquidity crisis?

There is a structural problem in assets and liabilities in India. There is not enough of debt available for long term funding. If we don't sort that out I am worried that in India funding for projects and capex will not take place. Earlier we had the development institutions, whether ICICI, IDBI or IFCI which used to give enough long term funding. Today that seems to have dried up.


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