Ajay Piramal warns of more IL&FS type crises

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January 28, 2019 11:25 PM

"Global pharma business, which accounts for nearly 93 percent of our pharma revenue, has done well with a 14.4 percent growth mainly driven by the critical care business," he said.

On the rise in interest cost, Piramal said, “our net interest margin have gone up by 75 bps.

Ajay Piramal, chairman of Piramal Enterprises, which Monday reported a 23 percent rise in consolidated net at Rs 603.27 crore for the December quarter, warned of more IL&FS type crises as the system is fragile. He also said the non-banking lending space will see more consolidation as it comes out of the IL&Fs crisis as marginal NBFCs are not going to get access to funds, leaving stronger NBFCs to become even stronger. Commenting on the crisis at Essel group, Piramal said, “I’ve seen a statement like this and this is a courageous statement by Subhash Chandra. If he has made this, then he will go all out to do it.” He also said his company has an exposure of Rs 225 crore but to a separate entity and is a performing asset with sufficient collaterals. “Going forward, we’ll have to be ready for a few more shocks in the system.

We have seen the crisis post-IL&FS… our system was fragile. There is still fragility in the system and lots of rumours are floating around..even a small event can spark off another crisis shaking the entire system,” he told reporters while announcing the December quarter earnings. Whether the current scenario in the NBFC space is a concern for his company, he said, “as we saw consolidation in the realty sector post-GST implementation, we are likely to see a similar consolidation in the NBFC space as well and there will be fewer stronger players in the system, and the marginal ones will close down.” Piramal attributed the good set of numbers to the strong revenue growth across financial services and pharma businesses and said total revenue rose 22 percent to Rs 3,489.08 crore from Rs 2,858.36 crore.

“We have delivered strong revenue and profitability with growth across our financial services and pharma businesses. We have maintained a consistent track record of growth of over 20 percent in revenue and net profit over the past four years,” he said. Net advances rose to Rs 1,841 crore from Rs 1,316 crore, taking total loan book to Rs 55,255 crore up grew 45 percent, while pharma and consumer products sales rose to Rs 1,156 crore from Rs 1,022 crore. ` “Global pharma business, which accounts for nearly 93 percent of our pharma revenue, has done well with a 14.4 percent growth mainly driven by the critical care business,” he said.

“Our focus has been to maintain liquidity. We’ve Rs 5,400 crore in cash liquidity and unutilised bank limits,” he said, adding during the quarter they raised over Rs 10,000 crore from NCDs and bank loans and brought down the CP exposure by 40 percent. On the rise in interest cost, Piramal said, “our net interest margin have gone up by 75 bps. So I don’t think cost is an issue because you can pass on these cost. Going forward more rational pricing of loan will happen and NIMs should go up marginally.

Piramal said his company’s exposure to realty developers has come down to 70 percent. “We are now diversifying our risks and going into housing finance where we have an exposure of around Rs 4,000 crore. By March, we intent to increase this to 10 percent of the total loan book.” On the India Resurgence Fund which it had launched with Bain Capital Credit for stressed assets, he said they will not be looking at acquiring stressed companies but only buying up portfolios.

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