Exclusive: ‘We have tightened underwriting,’ Q&A with Piramal Finance MD  

How do you plan to evolve your portfolio mix?

From a portfolio perspective, there are 2-3 important developments. Firstly, the rundown of our old legacy book. It has already now less than 3% of our portfolio and it will become irrelevant through the course of this year.  

We’re entering new areas like rural and gold loans. We have done some initial groundwork and started doing little bit of business. We are investing heavily in hiring and branch expansion for these businesses, planning steady organic growth over the next couple of years. Unsecured lending currently comprises 18% of our portfolio and we aim to grow it by 20% in the next year.  

What is expected share of these new segments in the total AUM? 

I expect them together to contribute about 10% to total assets over the next few years. 

With lot of players getting into gold loans, what is the strategy there? 

It’s a long term game. Gold loans may be at their peak: prices have surged, risks near zero—it can’t get much better, and some argue it could worsen from here. Entrants to gold loans now should build conservatively for the long term. Avoid rushing to build a large book, stay conservative with valuations, low LTVs, small ticket sizes, etc. That’s exactly our approach.

We are also trying to be an AI-led gold lender- using AI for valuing the gold, customer transparency on appraisals, and vault security management. We are also launching couple of product innovations. In general, I believe gold loan is potentially a very large market and there is still room for more players. 

You were also looking to expand the MFI and gold loan portfolio through acquisition. Any update on that? 

Yes, we are looking at potential inorganic opportunities. However, we have not come across opportunities which are of the right price and the right valuation that we’ll be comfortable with.

Any impact that you see from the ongoing West Asia war? 

Not yet. We are monitoring these segments very closely. However, we believe that some impact will come and hence, in all these vulnerable segments, we have implemented new underwriting criteria, based on which we have cut approximately 2.1% of the riskiest population in these industries.

So we have taken proactive action in terms of underwriting norms to make sure that if any deterioration happens in these segments, which we expect will happen if the war drags on, then we don’t want to expose ourselves any further. 

Facing higher hedging costs in ECBs and domestic bond yields, do you plan to adjust your borrowing strategy

Short-term borrowings dropped from 8% to 1% by March-end, minimising rollovers and urgency to borrow.  With a high cash cushion, we will borrow opportunistically as markets normalise. we are certainly moderating our reliance on banks and that process should continue. I’m comfortable with bank borrowing at about the 40% mark.

Any guidance on cost of funds and margins for FY27? 

Our recent AA+ upgrade aids market borrowings. By the time we churn out our entire borrowing book into AA+ borrowing, I expect improvement of 50-80 bps in about three years. On margins, we have not offered any guidance.