The Piramal Group, which owns a non-bank financier, is weighing acquisitions to enter the banking space and may look at public sector banks (PSBs) that the government puts on the block, group chairman Ajay Piramal said. “We’ll look at opportunities as and when they come. We’ll see,” Piramal said in an interview.
Possible targets could be IDBI Bank Ltd and a couple of other state-run banks. “Well, IDBI has been going on for years. Nothing has happened. So, obviously, there’s no interest now. They want to change the terms. So, we’ll see. I can’t say anything categorical today. Let’s see what the opportunities are,” he added.
Piramal did not participate in IDBI Bank’s divestment process, which was put on hold in November and is likely to restart only in the second half of next year. The government, which owns 45.48% of the bank, and Life Insurance Corp. of India, which holds 49.24%, together plan to sell 60.7% of the lender.
Apart from IDBI Bank, the government had announced plans to privatize two state-run banks, along with a general insurance company, in the 2021-22 Union budget. Media reports had suggested that the two banks were Central Bank of India and Indian Overseas Bank, but the government did not move any proposal on them. Reportedly, the government is redrawing its plan and any movement on privatization will only happen after the general election in 2024.
Aside from acquisitions, Piramal added that the group is keeping itself ready for a banking licence as and when an opportunity arises. “The banking licence is worthwhile. At the right time, we will approach it. Today, we are just preparing ourselves to be more and more in line with what the regulators want,” he said.
The Piramal Group houses Piramal Enterprises Ltd (PEL), among India’s biggest non-banking financial companies (NBFCs) with assets under management (AUM) of ₹64,000 crore as of 31 March. PEL has a housing finance subsidiary, Piramal Capital and Housing Finance Ltd, which bought struggling lender Dewan Housing Finance Corp. Ltd (DHFL) in 2021 through the insolvency route for ₹34,250 crore.
Piramal pointed to the DHFL acquisition to highlight his M&A (merger and acquisition) strategy. “We have done acquisitions whenever we find that there is value, and it fits in strategically. So, look at DHFL. That has been the largest acquisition in the financial services space. It was the first one which RBI (Reserve Bank of India) put in, and I am happy to say that it has gone well from all sides, whether it’s the RBI, whether it’s the other banks or the creditors, or whether it is us and the customers,” he added.
PEL earlier also had a pharma subsidiary, which was hived off and listed separately on the bourses as Piramal Pharma Ltd. Analysts said corporates are trying to segregate financial and non-financial verticals to unlock value. This is something the Bajaj Group had done long ago when it separated the auto and finance businesses; this is also what Reliance Industries Ltd recently did with Jio Financial Services Ltd.
As for bank licences, the RBI has been against giving licences to large corporates since it sees a risk in them raising money from depositors and investing in their own businesses. An internal committee of the banking regulator had in November 2020 proposed that corporates can be allowed to open banks. However, the RBI has not acted on that proposal yet. “While the RBI is not in favour of (giving) banking licences to corporates, it has allowed the Hindujas to run IndusInd Bank,” said Asutosh Mishra, head of research, institutional equities, Ashika Stock Broking. “I believe corporates can have wish lists, but it is up to the RBI to finally decide.”
On economic trends, Piramal said he is optimistic on the return of private investments in another six months. “Capex (capital expenditure) is now coming up, from what I understand, from at least whatever boards that I am on, and when I meet others also, everybody has plans and you will see that happening. So, I’m optimistic about it. It is starting now. I think the plans are being made. So, whatever time it takes…maybe, six months,” he said.
According to the company’s website, Piramal serves on Harvard Business School’s board of dean’s advisors, is co-chair of the UK-India CEO Forum, and non-executive director of Tata Sons Ltd. He also serves as president and chairman of Anant National University and is chairman of Pratham Education Foundation.
On the economic recovery in India’s hinterland post the covid pandemic, Piramal said the company has registered an increase in affordable housing loans (up to ₹15 lakh). “People are saying there is still not as much recovery, but we are finding that there’s good growth. So, there’s a bit of a dichotomy. They’re saying there is a slowdown in affordable housing loans. But, in our own case, we’re finding that it is improving… I would say we started with a small base, but the growth numbers are very robust,” he added.