Ajay Piramal: We are unlikely to lend to startups, says Ajay Piramal–Economic Times–02.08.2017

We are waiting for the housing finance licence, which we expect to get this month, said Ajay Piramal
Piramal Enterprises will explore the possibility of raising funds by selling shares to investors now that the announcements regarding IDFC‘s merger with Shriram Capital and quarterly results have been announced, chairman Ajay Piramal told ET . The company reported quarterly profit of Rs 302 crore, up 31 per cent from the same quarter last year, helped by a strong growth in its financial services loan book. Edited excerpts…

How was your performance in the financial services business this quarter?
We have had a robust growth in the financial services business continuously. Not only has the loan book grown 79 per cent but the quality is very good. We have had a couple of large disbursements in the non-real estate segment and they have come back with great returns.

We are waiting for the housing finance licence, which we expect to get this month. We also have a whole new category of assets we are lending to: emerging corporates. We will lend them Rs 100 crore or below.

Will you be lending to startups?
Unlikely. We will lend against cash flow.

How have you managed to bring down your bad loans to 0.2 per cent?
We are very strict about the quality of people we lend to. In the real estate book, we lend only to the top developers in a few select cities. We have a deep understanding of that city and the developer. Second, we have a corresponding parallel asset monitoring team that monitors the asset regularly to understand the quality. If there are issues, we can correct them. Our risk is totally independent of people who are running the business. They don’t have an incentive to keep lending.

Is your pharmaceutical business a cause for concern?
You have grown only 4.2 per cent this quarter… GST has affected the domestic pharma business this quarter. Globally, there has been depreciation in the value of the pound and dollar. But the underlying growth is still there — am not worried about it.

Are you looking at more acquisitions in the pharma business?
If you look at our history in past 30 years, we have been very disciplined. We didn’t acquire for the sake of acquiring: we acquired only if there was a strategic need, and if we could create value. We have done quite a few acquisitions last year – we will integrate them and see the effects. So far, it looks good.

You were going to launch a QIP. What’s the status of that now?
We are looking to raise funds because our financial services loan book has been growing fast. In that business, capital and cash are the raw materials which you can grow by. There were two events that took place. We wanted them to get over – IDFC and Shriram merger announcement and Q1 results announcement. It is important for us to be transparent, now we will see.

You had some road shows…
We told them that we are taking a pause. They wanted to know about how the quarterly results were. We could not share any information until it was publicly done. and dollar. But the underlying growth is still there — am not worried about it.

Is IDFC merger with Shriram Capital a liquidity event for you?
No, it is not.

How do you see the merger?
Let it take place. We have to wait for all the regulators to approve it. We will do the valuations and see. For us, it is a strategic investment.

Will you recuse yourself from the board? You would have a conflict of interest because you also have a big financial services business
We will do everything that is in the best interest of Shriram Group. We will take things as they come.

Through your QIP funds you can raise three times more debt. Is that how you are looking at it?
We are examining everything. QIP is not a done deal. We are looking at all options, and are very shy of diluting equity.

What about demerger of pharma and financial services business?
We have told shareholders that we will do it in the mid-term, we will do it at the right time. In the meantime, shareholders wanted more transparency, so we moved most books to an NCBFC, which is a 100 per cent subsidiary. They wanted to know the equity and debt, which is available. We are getting more transparent.

via Ajay Piramal: We are unlikely to lend to startups, says Ajay Piramal

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