The Piramal Group has adopted a customised and built to suit technology platform. It has helped the brand in achieving enhanced operational efficiency by eliminating data duplication, reducing paperwork, facilitating a seamless data flow for effective monitoring and control, and in implementing a robust compliance environment, says Khushru Jijina, Managing Director, Piramal Finance and Piramal Housing Finance, in conversation with Elets News Network (ENN).
Piramal Group underwent a major organisational change recently when it streamlined its financial services. What led to this change?
Growth in financial services was primarily driven by increase in size of loan book, which grew by 69 per cent during last year to Rs 42,168 crore as against Rs 24,975 crore in Financial Year 2017. Construction Finance now accounts for 60 per cent of the company’s real estate loan book. Our Real Estate loan book has grown rapidly and achieved a five year Compound Annual Growth Rate (CAGR) or a growth of 88 per cent. Our Corporate Finance loan book has also achieved an equally impressive 118 per cent growth when compared against the previous FY. The group recently completed the process of merging Piramal Finance and Piramal Capital with Piramal Housing Finance with the intent of streamlining the financial services business-another step in the direction of potentially unlocking the value that resides in each business vertical.
Post the merger, Piramal Housing Finance can now operate as a single entity that spans the entire capital stack from construction finance to housing loans. The combined entity would also be able to access financing on better terms and benefit from a ratings upgrade due to a well-diversified and granular asset profile. This consolidation of all financial services entities under one company is further expected to lead to significant long-term synergies including higher profitability, higher risk-adjusted returns, and return on equity improving by around 200 to 300 Basis Point (BPS) in the years ahead.
Piramal Finance has set up a separate vertical to invest in affordable residential projects across the country. What is it aiming at?
Piramal Finance has set up a dedicated team to invest in affordable and midincome residential projects across major metros in India. We have identified an initial pipeline of Rs 3,000 crore with transactions across the major metros under active consideration. While many players in the market are focused on providing equity or debt capital towards affordable and mid-income housing, Piramal Finance’s unique ability to provide a comprehensive end-to-end solution – including both early stage equity as well as construction linked debt – is truly unparalleled as it helps the developer achieve financial closure for the project on Day Zero.
Our ability drive sales through its platform Brickex and fund those sales through customised home loan products specifically tailored towards salaried as well as self-employed end users acts as a unique competitive advantage. Piramal Finance has a highly experienced team focused exclusively on scaling up its presence to $2 billion by 2020 within the affordable residential projects segment.
Technology is reinventing the financial institutions in a big way. How is Piramal transforming?
The country’s NBFC sector is experiencing a rapid growth due to macroeconomic conditions and high credit penetration. It is also witnessing major disruptions through adoption of tech-driven innovations. In our early years of growth, the platform as a whole and the senior management, in particular, focused on building a standardised set of systems, business processes and underwriting standards that would enable us to achieve scale whilst also redefining the market with innovative products. The platform today is touted as having some of the best processes and governance standards as evidenced and validated at multiple instances by the regulators, various external service providers as well as the ratings agencies themselves.
Technology has also played a significant role in aiding this growth. We adopted a customised and built-to-suit technology platform that spans the entire wholesale finance business and helped us achieve enhanced operational efficiency by eliminating data duplication, reducing paperwork, facilitating a seamless data flow for effective monitoring and control, and in implementing a robust compliance environment. For the recently launched Housing Finance Company (HFC), again we have relied extremely heavily on a technologyled solution in both customer acquisition and stakeholder (distributors and developer) management. We have the ability to send out well-targeted propositions, provide more personal access to customers, lower turnaround time and provide more efficient service. Over the medium term, this would significantly impact our ability to scale the size of our book, whilst also creating a USP, through our reliance on technology, when compared against the other players of scale that operate in this industry.
What innovations is Piramal Group planning in near future?
The Piramal Group has successfully created industry benchmarks time and again by launching unique strategies and relying on both product and process innovations to gain a competitive edge. In order to detect early warning signals, we created a unique asset monitoring model across our investments with the team monitoring each project on a regular basis. This includes conducting regular site visits for real estate projects, maintaining monthly MIS updates on progress of each investment, ensuring collection of receivables, conducting regular project monitoring meetings with the clients and more. Additionally, the fund management business also enabled the platform to bring to market certain unique and innovative strategies such as slum redevelopment (Mumbai Redevelopment Fund) or bulk buying of apartments (Apartment Fund). We have also translated this entrepreneurial mindset into the introduction of multiple new products within our wholesale lending business over the years – from a ‘Flexi-LRD’ to the ‘Piramal Preferred Partner’ program. More recently, we set up the Emerging Corporate Lending team to target small and medium enterprise lending.
This will enable access to smaller corporate who are typically not covered by traditional wholesale lending channels. In our retail Housing Finance business, by structuring our business and stakeholder management around B2B rather than B2C, we have effectively increased our ability to acquire customers by using existing relationships with distributors and developers alike within our wholesale lending business. By creating a adapting a technology-led solution to acquire and onboard new distributors at a rapid pace, and ensuring that each inquiry is taken through the diligence and documentation process quickly and transparently, are able to significantly reduce our turnaround time to disburse. This ability to prioritise each stakeholder in the value chain underscores our desire, intention and ability to operate effectively and achieve scale in an already crowded market. And finally we have introduced various product-led innovations focused on servicing the end users. For example, we have created a unique “SUPER” loan product which factors their future earning potential whilst defining eligibility criteria thereby enabling them to purchase a larger unit today.