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Our footprint was in India, now we will get into Bharat: Ajay Piramal

In an interview with ET Now, Ajay Piramal, Chairman, Piramal Group, talks about completing the DHFL buyout.

Talk us through the experience of the DHFL buyout
The experience is quite exciting. You know it has been more than a year since we have been looking at it actively, actually more than that. There were five rounds of bids so it went through its ups and downs. The results are there for us. Also since it was first of its type in the IBC ,we are a financial services company, a lot of people were also learning as we went through not only the regulators but even the COC. I think it has been a good journey.

Let us talk about what it actually does? How meaningful is it for Piramal?
This is part of a strategy that we at Piramal have had. We have always wanted to have a diversified book. Whether it is between wholesale and retail, several years ago we had made an investment in Shriram. The idea even then was how can Piramal have a book which is both retail and wholesale. For reasons which we have explained before, we did not go through with the Shriram Investment.

We were always on the lookout on how to develop a retail business. We started building on housing finance a few years ago on our own. As you know that building any retail business does take time and when we saw an opportunity at DHFL, which we have been actually starting from a while. It is not that we have been studying even before it went into IBC and that is when we realised that this is a good opportunity.

In the near term, we will become now be 50-50 in terms of wholesale and retail which is a big change as far as we are concerned. Till now our footprint was more in larger cities as far as our loan book is concerned. Now we will get into Bharat that is a tier two, tier three cities. We will get 300 branches with DHFL and a staff of almost 2200 on the direct roles plus others associated with us. So almost 4500 people are joining into our system. Overall I think this will be a very transformational as far as we are concerned.

There is a very interesting presentation which you have shared with the press release. It talks about a lot of data points and how this piece fits in your overall financial services business. How it opens up great horizons for your financial services business. Can you tell us more about that?
As I said about our presence and understanding in tier two, tier three cities. We believe that one of the biggest growth areas for the country are going to be the emerging India or Bharat. In tier two, tier three, tier four cities and therefore with the branches and the understanding of the market, not only do we have an opportunity as far as affordable housing finance is concerned but in other areas as well. Whether it is in small business loans, whether it is in lab, we have also gone into partnerships about used car loans. These are the sort of areas that we want to expand in further and this gives us a way into that.

The quality of books also improves a whole lot after this transaction. For example, your cost of borrowing comes down. and How strong is the position of books right now? Any fundraising which lies ahead? You have already done some but is there any more need?
If you look at the numbers, on its own had a debt equity before this on a consolidated basis of 0.9. Even Piramal Capital and Housing Finance which is the company which will survive after the merger of DHFL and TCHFL, there the debt equity which was 2.1 at the beginning of the year will only go up to 3.5. So we have done the fundraising early on.

Today we do not need any funding. In fact, this is a better utilisation of our funds because debt equity ratio improves, and the efficiency of our equity only improves. With this transaction our borrowing cost comes down significantly because we have now got 10-year funding with NCDs of 6.75% of Rd 19,550 crore. So again that brings down our overall cost of borrowing by about 130 bps.

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