The merger process between Piramal Finance and Piramal Housing to create Piramal Capital will be over by end of May this year and the new company will list on the exchanges maybe within two to three years, Khushru Jijina, MD of Piramal Finance and Piramal Housing Finance Capital said.
“It is very much on time. Now, we have to get various approvals. End May is when we expect the whole process to get over,” Mr. Jijina said in an interview. “In the mid-term we will look at separating the pharma and the financing operations. It could be two or three years.”
The merger will bring developers and buyers of houses under one umbrella to stand apart from competition, he said.
“What we have done is that whether the developer requires equity or construction finance or debt, we have got one person serving him. The logic applies to the retail product – housing finance. What we look at is housing finance, another product in our developer platform to help the developer sell better.”
Bad loans
A sharp increase in bad loans of state-owned banks is putting on capital adequacy and credit growth, according to a investor presentation by Piramal Enterprises, the parent company of Piramal Finance. Lenders and corporations are running out of options and sectors like power, steel, construction, textiles, are under stress. “Resolution has been elusive so far, but regulatory push is evident from New Insolvency and Bankruptcy Code (IBC) and recent RBI ordinance,” according to the February presentation.
The transition to Real Estate (Regulation and Development) Act (RERA), which came into effect from May 1, 2017 is expected to slowdown new real estate projects and increase working capital requirements of developers, thus creating pressure on their operational performance during the current financial year ending March 31, according to rating agency ICRA. “What is really playing out is there is clearly the separation of men from the boys in terms of the developer community. It is not about big or small. Clearly that has played out post-RERA,” Mr. Jijina said.
Shift to organised sector
“Few of the developers, who imbibed corporate governance and execution, will survive. We have more than 370 projects which we have funded in India and I have primary data of those. Those clearly tell me that those developers who are credible and good are able to sell. If you separate the good developers from the unorganised you can clearly see the shift in the last six months.”
Piramal Finance’s total loan book, both retail and wholesale is ₹70,000 crore as of today, he said. The company’s foray into hospitality sector is “progressing well,” he said. “ We have a very healthy pipeline of about seven more hotels. We believe that in the next three years, we will be able to grow a loan book of ₹10,000 crore in the hospitality sector.”
“This year we will move in to cities like Nashik. In the next six months, you will hear us talking more about this. We have a 2020 roadmap of having 24 branches. We also have a corporate finance group which is non-real estate. You will see a lots of action in the logistics and warehouse sector.
“Our rights issue closed in February and we raised ₹2,000 crore and we raised ₹5,000 crore in December through a QIP. That will take us through for at least the next three years,” Mr. Jijina said.
