Piramal Capital & Housing Finance (PCHFL), a wholly-owned subsidiary of Piramal Enterprises, is scouting for partnerships with another 20 technology firms to originate business. The non-deposit taking finance company might also invest in some of these firms, its managing director Jairam Sridharan said. The firm is betting on the emerging trend of Buy Now Pay Later (BNPL), he said in an interview with Rajesh Kurup. Excerpts:
How did the pandemic impact your business and when will it bounce back to pre-Covid levels?
On both the credit risk and new customer acquisition dimension, the businesses have reached and surpassed pre-Covid levels. There are some lingering effects of the pandemic, with about 2% of our customer base opting for the two rounds of restructuring (RBI norms). While the rest have bounced back, these 2% need to be watched closely, and new business volumes are clearly above pre-Covid levels.
On the integration of Dewan Housing Finance Corporation (DHFL) with PCHFL?
The merger was completed on September 30. At the time of bidding, we had promised that we will not be doing any large-scale layoffs, and now we have been able to finalise roles for everybody. We have integrated the two organisations to create one consolidated firm, and we have also integrated our different customer technologies.
We are also hiring across DHFL branches as by the time we acquired it, DHFL’s staff strength fell by about 65%. The integration is now sort of fully complete and we are working towards reigniting business origination from all branches.
There were a lot of lawsuits filed against DHFL?
One of the advantages of going through an IBC (Insolvency and Bankruptcy Code) process is that a lot of those liabilities get taken care of. Of course, there are some customer complaints and collection-oriented litigations, which we will continue to work on and close in the due course.
You were also scouting for further partnerships with technology firms?
We currently have nine partnerships and are working on 20 more. Our intent is to have a broad ecosystem of merchants and electronic aggregators, and a platform to originate customers. We want to be present across the various modes of engagement that a customer might want to have. The partnerships would be with a fintech company or a platform. So far we have entered into partnerships only, but there will be other modes of engagement, including investments.
Buy Now Pay Later (BNPL) is the buzzword now in retail lending.
It’s obviously an interesting product proposition. It’s a simple idea that the customer can convert the purchase directly into some installments, usually without paying any interest if it is for a short term. For a slightly longer term, a customer would have to pay some interest.
Globally, BNPL works on merchant discounting but in India merchant discounts are relatively low, which raises some challenges. Of the nine digital partnerships that we already have, some are already doing BNPL. We like the business and are originating a lot of customers using this model.
Going forward, what is the plan for the real estate business?
The real estate was the original business where we started as it is a large and capital-intensive sector. In the past, we had a lot of concentration on the sector. In the medium term, we want to build a business which is two-third retail and one-third wholesale lending, and within wholesale lending, half of it would be real estate and the other half non-real estate related wholesale lending.
We will continue to focus on retail, however, that doesn’t mean we are exiting the real estate sector but it is going to be a smaller proportion of our portfolio in the future. Being too concentrated in any one sector is a risk.
On your plans for retail lending following the DHFL deal?
Following the DHFL acquisition, we are present across 300 branches. We want to have coverage of about 1,000 cities in the next three years, with physical presence in about 500-600 cities. In the next 12 months or so we expect to open another about 100 branches and then maybe 100-150 branches in the 12-15 months after that.