‘Banks Not Able To Support Country’s Significant Finance Need’

Piramal Enterprises Chairman Ajay G Piramal talks to CH Unnikrishnan on why the group strongly believes in its most strategic financial services business.

Edited excerpts:

Piramal Group's recent evolution as a large financial services player has been noteworthy. Grown as a healthcare focused company and still continued within the same space, why the group got attracted to financial services as its choice of diversification?
It is my belief that in any growth market, the financial services industry tends to lead growth in nominal GDP by a factor of at least 2 multiples. With our economy poised to grow at a rate of about 7 per cent, this implies a 15-20 per cent growth rate for the industry which, over the long term, is fairly attractive. Moreover, our markets are significantly under penetrated: the loan to GDP ratio is still low when compared against other emerging or developed economies. To add to this, the financial crisis in 2008 had created many opportunities in the form of market dislocations that one could capitalise on (a case in point here was our deal with Vodafone where we managed to earn a superior return over a short term). Finally, public sector banks and few of the large private sector banks were perhaps not in a position to support this significant need due to their own balance sheet concerns. All of this made for an attractive case to plan and pursue growth within financial services.

Why being an NBFC is still relevant and remains so in a market where banks (both public and private) are getting more reformed and revolutionised to meet the customer needs?
I think the answer lies in deep customisation. We believe that with the flexibility of our capital we are able to deeply and uniquely structure each transaction in a way that appropriately mitigates the risks and secures the return. We believe that we are in the business of nurturing long standing relationships with the counterparts in a way that uses capital to solve a particular situation. The fact that we are also able to service their needs across the entire capital stack further adds to the stickiness of these relationships - evidenced by our ability to commit to repeat transactions with our preferred partners.

At the same time, across both the real estate as well as the non real estate portfolio, we have focused our efforts on complementing the investment function with truly independent risk, legal and asset management verticals - in fact an inordinate amount of time and resource is allocated to the ongoing monitoring of each transaction. Finally, as the platform scales up we are constantly mining and capturing primary level data at a transaction, micro market as well as a sectoral level and relying on the same to make subsequent underwriting decisions more 'intelligent'. Therefore there is a continuous process of becoming more 'knowledgeable' as an enterprise.

What is the larger vision going forward as a conglomerate having manufacturing, knowledge and data driven businesses and financial services as its key focuses?
The Piramal Group is at its very core a values driven organisation and our deep underlying belief and motivation is doing well and doing good. We place a great deal of emphasis on how we conduct ourselves in every businesses or enterprise that we choose to pursue and it is our values as an organisation that defines us and bind the various businesses together. We believe that each of the three distinct businesses housed under the Group are capable of growing and in fact flourishing on their own. All of the systems and processes have therefore been streamlined to facilitate the pursuit of scale as well as market relevance and impact in each vertical.