Piramal Enterprises Ltd

(Krishnaraj) #755

I should point out this is patently untrue. STFC and SCUF are led by people already with the group for a long time. Insurance businesses also have CEOs from Shriram. Shriram Capital, the holding company, has Mr Laddha as MD n CEO, but that does not amount to much because there are no operational businesses with that.

These may be verified through a casual glance of the comapnies’ management over a pre / post Piramal investment.

(Jaclyn) #756

It appears to me they have done it few times. But should we call it as from NPA to recovery, I doubt it.

Listen to this video from 6-10 minutes on cases he explains.

(Kumar Saurabh) #757

They r already shifting attention from residential real estate to commercial real estate n hotels n won’t b surprised if lot of new loan book comes from these two segments where stress is lesser n growth is back

(Amit Mehta) #758

If you read few articles listed below you will realize that AP is in control of Shriram group and is seen as the successor. Though I completely agree that not a lot of employees has come from PEL as I mentioned in the above article. (edited and corrected now)

My understanding came from my discussion with the management at the time of the proposed IDFC transaction. I asked them who would control the management of the combined company and they told me that it would be AP, similar to Sriram group.

(Amit Mehta) #759

Thanks. A very informative video, which I had missed.

So they do have few projects which they have taken over and got their money back, which is comforting.

Though still wondering how did they manage to show “no defaults”.

(Rohit Chauhan) #760

Piramal financial servcies CIO meet 2017.pdf (1.7 MB)
Slides 18-31 shows the process followed by the company to manage asset quality. How effective it is, time will tell

(Marathondreams) #761

Being a contrarian, doubts were always expressed when AP makes an investment /acquisition or enters into new business area. Remember he had no prior knowledge of pharma industry when he acquired Nicholas Labs in 1988 in his early thirties. Similarly concerns were raised when he sold part of pharma business to Abbott, made investments in vodaphone, sold investments in vodphaone etc etc. Now looking back, all ideas looks great!

So let’s accept that we may not be able to comprehend why AP has taken stake in Shriram group or why he is so gung-ho about RE financing when everybody is pessimistic. But after 5 years, it would be crystal clear :wink:

I am sure has made many mistakes and will continue to make new mistakes. But as long as his misses are smaller than his hits, I am ready to go along with him. He has done it for last 30 years by growing share holder returns at 30% CAGR… what else one wants from a company promoters?

(Jaclyn) #762

FY18 - Q3 transcript:
Anil Kumar Tulsiram: Sir, the next question is I understand generally in construction finance there is a moratorium of one year - two years before which repayment of principal and interest begins. So what I want to understand is how should I look at how we say our NPA numbers are just 0.4%. So without the repayment even happening how do I look at the NPAs. So help me understand this.
Khushru Jijina: So let me correct you. In construction financial, there is no interest moratorium.
Anil Kumar Tulsiram: Okay. Only principle moratorium.
Khushru Jijina: Yes. In fact, as Chairman said, I want to share a number with you that this quarter we have grown but in fact, this was a quarter with the largest amount of repayment of Rs. 4,000 crores and where did this come from maximum from structured debt the high-yield, riskier debt.

FY18 - Q2 transcript:
Ronak Jain: Yes. So that is a good point, but we just wanted to know whether is it a case of refinancing by those companies for lower cost of funds?
Khushru Jijina: No. I have always said that please look at Piramal Finance as not a lender, it is a financial partner, we do end-to-end. So, without sounding arrogant today, I would say 99% of our developers would not leave us for rates because they know what we can provide, the service and solution, we are solution provider, the advisory which we go beyond lending, people do not leave us for rates. So, I am very happy to tell you that this prepayment has happened, especially into big accounts like Lodha and Omkar where massive prepayments have been done. So, which I always say on all of my calls that market could be good, could be bad but proof of the pudding is really into the underwriting. So, that is what it is all about. So if I may just take one more minute on that, for the benefit of everyone who is on the call. I myself said that the markets have slowed down, then why are we doing well? I have always given you all this example, and today it has really played out, let me just repeat it, if I take two minutes more of that. I always give this example, a simple example of underwriting of construction finance.
Construction finance is a banker’s domain. But I have always said it is not as simple as that.
Why? Because with that same example I will repeat, when the developer comes to you and wants Rs. 100, to make it very simple, or Rs. 100 crores of construction finance, what typically banks do that they look at probably whether the approvals have come, whether the site is mobilized. And obviously when a developer is asking for Rs. 100 crores he may actually need Rs. 250 crores to complete the project. And the assumption is that Rs. 150 crores will come from sales. That is where folly is, really, which I have always explained to all of you. At the end of the day, you have to be very clear whether the Rs. 150 crores will come from sales or you are ready to put in that money in that quarter where the deficit is. And that is why we look at construction finance very differently and we look at our deficits quarter-on-quarter in our assumptions. And only if we are comfortable giving more on day one, which the developer not aware, is when we sanction, because at the end of the day we want the project to get completed. So it is no more relevant than right now when the last mile funding is required. I mentioned to you’ll right, when the project is almost getting finished people thought that now we are in the easiest zone, the sales have stopped because of GST. It is because of our underwriting today, that I can reconfirm to all of you’ll that all our projects are on track. In fact, we are looking at this as an opportunity. We have now approached other developers where the other lenders are there and who are not able to grapple with this situation because of the last mile funding. Just to give an example, you put in Rs. 40 crores, the developer needs Rs. 40 crores and he has got locked in receivables of Rs. 400 crores. Those are the type of opportunities which are actually playing out for us; it is all about the underwriting at the end of the day.

If the loan book is unseasoned what does the following mean?

FY18 - Q2 transcript:
Ronak Jain: Sir, I want your views on the repaid and prepaid numbers in the real-estate lending portfolio.
So in this quarter it is Rs. 2,290 crores and in the previous quarter it was Rs. 1,807 crores. So, how should we look at this numbers, is it a matter of concern for our business?
Ronak Jain: Sir, I was looking at the repaid and prepaid numbers.
Khushru Jijina: Okay. So, no, as I mentioned to you, in fact, that should tell you the quality of our underwriting, because the churn is always good. In fact, in my mind, we always take anywhere from 30% to 35% of the book being churned on a regular business, and that is what is happening and that should tell you about the quality of the business, because if the book is not churning then that is a cause for concern. Am I making sense?
Khushru Jijina: … The other number which is very important when we talk about the real-estate industry slowdown and there is no cash and sales available, you all will be surprised to know that in this last six months, in spite of this growth, we have actually got prepaid and repaid to the extent of Rs. 5,400 crores. And to put it in context, Rs. 5,400 crores is 22% of our March AUM numbers of real-estate.
Also refer to the Q&A for the question a. It also has the answer to this question.

As some of the earlier answers show, the portfolio is churn is happening and hence doubting the NPA being defrayed is probably not justified.

As for the some other questions like duration of the loans, ALM mismatch etc, I could not get an answer. Let us continue to search for an answer to those concerns raised.

(Krishnaraj) #763

Thank you for trying to answer these questions raised by Ambit. Requires hard work!

This is a really tough one to judge, for me.

(butun) #764

Unlike what is being suggested in reports and posts above, seasoning is not the biggest factor of credit risk in construction financing of avg tenure of 4 to 5 years. In fact, I will stick my neck out and say that it would hardly matter while rank ordering lenders who have such short tenured loans like 2-4 years. Underwriting and deal structuring matter the most. Refer to the diagram which has different type of deal structuring which straddles the credit risk by creating right sort of structure for different type of credit risk for PEL. In my view, the comments on seasoning can be safely ignored. It is either sectoral risk (Cyclical and macro moves, good punts only observed with the benefits of hind sight) or builder risk (Underwriting and deal structuring). Bad deal is a bad deal in large scale financing, it would not go bad just because it had 1 year on the books if the sector has not gone cockroach by then. What is important is, if the deal goes bad how do you recover the money. Only two tenets of lending: a. Lend to credit worthy b. Recover if found not credit worthy. Rest all are basically benefit of hindsight.


Thanks for taking the effort. Does require hard effort, also appreciable is Khusru Jijina’s explanation.

(Sandeep Patel) #767

Something about Mr. Piramal that resonates with investors…

The Power of Detachment
Ajay Piramal – “My greatest learning from the Bhagvad Gita is that if you are dispassionate you will win.

Source: https://intelligentfanatics.com/forums/topic/the-power-of-detachment/

(Manish Vachhani) #775

Please do not spam the thread with such posts. You should show maturity by asking your broker about the same. This forum space is valuable, so do not waste it for such petty issue.

(jugal mansharamani) #776

90% of builders in realty dying as they cant cope with RERA: Khushru Jijina, Piramal Finance - https://m.economictimes.com/wealth/personal-finance-news/90-of-builders-in-realty-dying-as-they-cant-cope-with-rera-khushru-jijina-piramal-finance/articleshow/63340452.cms?utm_source=WAPusers

(..pd..) #777

(Marathondreams) #778

Important point mentioned in the news - Piramal housing finance crossed Rs 1000 Cr of loans and started Delhi operations last week and Bengaluru operations this week.

If any of fellow valuepickrs residing in Delhi or Bengaluru and seeking housing loans can visit Piramal HFC and do some scuttlebutt, it would be great…

(Jaclyn) #779

Remember their model is B2B2C, in other words they operate differently compared to traditional housing companies which open branches closer to catchment areas. Piramal has sold these 1000 cr loans using 3 offices namely one each in Mumbai, Thane and Noida before the Bengaluru branch. That is quite unique to comprehend easily.


If I read it correctly, then the company is giving loans to home buyers of the projects where it had earlier given loans to the developer. So, homebuyers use the money to pay the developer and the developer would repay PEL. The total amount of loans given by PEL do not increase, but the liability shifts from the developer to the home buyer. Home Loans business may cannibalize the developer lending business. When compared to the developer loans, home loans would have lower profit margins and be lower risks. So, PEL profit margin may decline but leverage may increase due to lower regulatory risk weights of home loans. It would be interesting to see the net effect on company’s performance.

(Jaclyn) #781

PEL has been innovative to design products which can make it tempting to the buyer even if it is priced higher compared to other hsg companies. This could be done in close co-ordination with the developer. Now the developer will be pushing the customers to PEL and thus they become a captive marketing agent which can eliminate DSA cost and also elongates the life of money lent, but in a different form. Thus it is win-win for PEL, developer and end customer.

Ultimately it is RoE which matters and not the higher or lower spreads coming out of different types of loans. RoE subsumes even the provisions and NPA’s into one number.

So the means may vary but the end matters.

(..pd..) #782