‘FINANCIAL SERVICES BIZ TO OVERTAKE PHARMA’
Piramal Enterprises’ m-cap has grown 120 per cent in the past year to ~45,029 crore, largely on robust growth from its non-bank finance corporation business.
AJAY PIRAMAL, chairman of the Piramal Group and the Shriram Group, spoke to
Abhineet Kumar on his plans
Do you expect revenue from your financial services business to overtake revenue from the pharma business in the current financial year?
Income from financial services grew 92 per cent to ~3,352 crore in 2016-17; the NBFC business’ loan book grew 87 per cent to ~24,000 crore. Revenue from pharma grew 12 per cent to ~3,893 crore. It is a fair assumption that our financial services will overtake the pharmaceutical business in terms of revenue, as the growth momentum on the loan book continues.
What is the update on the plan to merge your NBFC business to that of Shriram Group?
The next two to three years will be a golden period for NBFCs. The Indian economy is growing at 7.5-8 per cent a year. The financial space always grows 2.5 times to that of gross domestic product; so, the normal growth should be 20 per cent. However, in the financial services space ,the public sector has got 70 per cent share and is saddled with non-performing assets (NPAs). Also, some of the large private banks have large NPAs. Their attention is focused on solving that problem; it also means they do not have enough capital. And, because of the past NPAs, their ability to take the risk to lend is reduced. Hence, NBFCs will have a good run.
With Shriram having 70,000 people, the culture is different from Piramal. If you think of a merger today, we will be spending the next two years in solving these integration issues. Therefore, it is a distraction. So, why lose the best time? By not merging, neither growth rates would be affected. Both Piramal and Shriram companies will continue to grow. So, we should do the merger at the right time, if at all we have to do it.
There is talk that you might consider buying some small banks.
We have enough room to grow. We started the NBFC business only in 2012 and have become a significant player. From last year to this year, we doubled our loan size, and are getting a good return. We are having a 25 per cent return on equity and our gross NPAs are only 0.5 per cent.
Where do you see your pharma business going from here?