Piramal Capital set to add gold, micro business loans to portfolio next fiscal

"We are looking at the traditional gold loan business," he said. "Operationally, it's a complex business... There are lots of things that can actually go wrong with it. Building the right controls is very important. But it's a business we like, and we would love to do more of."

Sridharan said unsecured microfinance loans and low-ticket loans against property will be also introduced mostly in the first half of the next fiscal. "These loans will be small-ticket... may be less than ₹10 lakh, with a small shop or a property as collateral," he said. "This business has become big in terms of revenue over the last five to six years as many new players have emerged who have done interesting work. We think that there is a market there for us to explore as well and try and build some of that business for ourselves."

The company has been slowly building its microfinance business for the last one-and-a-half years, but at about ₹1,000 crore, it is still a very small part of the company's ₹70,823 crore of assets under management (AUM).

The company's credit cost increased to 162 basis points of total loans in the quarter ended December 2023 from 121 basis points in September 2023, but Sridharan said the credit environment is still benign and the new loans, though at higher risk, will have little impact on costs. One basis point is 0.01 percentage point.

"There is never a perfect time to start a new business, but we are better off not trying to time the market," Sridharan said.

Retail loans constituted 64% of Piramal Capital and Housing Finance's AUM at the end of December.

The company aspires to have 70% of its loans from retail with the rest of the 30% in wholesale loans to real estate and mid-market companies.

"We have reduced our average ticket size from real estate loans to about ₹180 crore from ₹500 crore earlier with loans now spread more geographically outside the big metros," Sridharan said. "We are also giving non-real estate loans of average ticket size of ₹50 crore to companies rated at investment grade and may also look at small developer finance as part of our new wholesale loans."

The company has halved its wholesale book, which it got as part of the acquisition of the erstwhile DHFL, to ₹18,693 crore at the end of December 2023.

In a post-result note, said it expects Piramal Capital and Housing Finance to gradually navigate through its changing product mix, leading to reduced uncertainty on cashflows supported by strengthening of the risk standards, which will improve profitability over the medium term.

The company is in the final stages of fully exiting its partnership with Shriram Group and announced that it will sell its stake in Shriram Investment Holdings by March 31 in what is probably the final leg of ending a failed venture that started in May 2013.