Pidilite Industries, best known for adhesive brand Fevicol, is set to launch its lending business in a “small southern market” as part of its move to provide credit to its user base, managing director Bharat Puri said on Thursday.
The Mumbai-based firm recently announced that its foray into the lending sector by acquiring existing non-banking financial company (NBFC) Pargro Investments for Rs 10 crore. Pargro, currently debt-free and without lending operations, will be transferred to Pidilite from the promoter group entity after completing the share purchase agreement by March 31, 2024.
This diversification follows Pidilite’s introduction of decorative paints in select geographies under the Haisha brand, earlier in the financial year. Haisha is a throwback to the yester-year Fevicol advertisement ‘Dum Laga Ke, Haisha!’
Puri said that the paints business was restricted to the markets of Andhra Pradesh, Telangana and Orissa for now. It was currently in the pilot stage and was launched in response to the need to have a complete range of products from wood finishes to adhesives to paints at dealer outlets. Pidilite operates a 50:50 joint venture with Italy’s Industria Chimica Adriatica Spa (ICA) for wood finishes.
The lending venture aims to provide small loans to Pidilite’s existing dealer and contractor network, with an initial exposure cap of Rs 100 crore, Puri stated.
The capital commitment will be a mix of debt and equity deployed into the NBFC arm, a wholly-owned subsidiary of Pidilite, over the next two years
“The reason for our success is our user base. We saw that there was a requirement of small-ticket loans and capital from these dealers and contractors, which is what encouraged us to get into the lending space,” Puri said, adding that it would cater to the Pidilite ecosystem with the firm monitoring the end-use of loans.
“It is not a big-bang initiative. We want to understand this business before take bigger steps. For now, we would just be taking small steps,” he said, adding that Pidilite would appoint a new management team to run the NBFC.
According to Puri, the lending arm would help deepen loyalty, improve customer connect and aid in premiumisation for Pidilite. While the business would be run by an in-house management team having proprietary information on customers, Pidilite was not averse to tying up with partners later, Puri added.
Pargro Investments, according to Puri, would be transferred to Pidilite from the promoter group entity after the share purchase agreement was completed by March 31, 2024.