Ajay Piramal sees short-term pain for NBFCs, stresses worst is over

Ajay Piramal, Chairman, Piramal Enterprises

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26 Aug, 2025 12:21

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Reiterating that the worst is over in the NBFC crisis, leading entrepreneur Ajay Piramal said that the need is to "separate men from the boys."

While underlining that some of the NBFCs may continue to have some pain, the Chairman of Piramal Enterprises said the stronger ones should do better in the medium term.

"There could be some more pain for some NBFCs. On the other hand, the stronger NBFCs should do better in the medium term. Demand for loans exists," Piramal told Moneycontrol. 

The financial services segment of Piramal Enterprises grew by 46.7 percent in the second quarter of the financial year. The segment includes the company's NBFC unit Piramal Housing & Capital Finance.

The NBFCs that are in trouble are those "who don't have enough equity or promoters don't have enough skin in the game, or don't have enough pedigree or track record, and don't have governance...we need to separate men from the boys," said Piramal.

The NBFC crisis in the country sparked off after IL&FS defaulted on payments, leading to panic in the stock markets. The government was forced to intervene and replace the company's board, which is now headed by veteran banker Uday Kotak.

Piramal, however, noted that IL&FS is not strictly an NBFC. "Out of its total loan exposure over Rs 1 lakh crore, the NBFC book was only Rs 20,000 crore. And even  if 25 percent of the loans are bad that's only Rs 5,000 crore," said Piramal during the interview shortly after his company announced its second quarter results.

Backed by a 59 percent growth in its loan books, Piramal Enterprises' net profit went up by 25 percent in the September quarter, to Rs 480 crore. Its income grew 24 percent to Rs 3,144 crore during the quarter.

'Good it didn't happen'

In 2015, Piramal was interested in investing in IL&FS, but the deal didn't go through because of differences in valuation.

The entrepreneur doesn't regret the decision. "We had done enough due diligence to have question marks. It was not a done deal from our side," he said. "It's good it didn't happen," he added.

Piramal continues to be cautious about making an acquisition in the sector. "In the NBFC space, we have been cautious about any inorganic growth. It is very difficult to access the book of NBFCs unless you know how the loan has originated. And then to pay a premium to that, it doesn't make sense. We have stayed away from dong any acquisition," he said.

At the same time, he is bullish about the space. "The GDP is growing at 7.5 percent. And if you had inflation that will 12.5 percent. And we have a $2.5 trillion economy. Where do you see such a growth rate?"

He added: "The growth funding can't happen just through banking. We need NBFCs. If India has to grow, you need NBFCs."

To decide on generic business

Piramal is yet to take a call on re-entering the generics pharma business, even though the non-compete agreement with Abbott Laboratories ended in September. In 2010, Piramal had sold the generic business to Abbott for $3.7 billion.

"We are evaluating and have not taken a decision. We have to see whether this is a space we can enter today and get a return on capital," says Piramal.

While he wants to take the inorganic route to enter the market, Piramal admits that the whole sector is different and not as attractive as when he sold the business eight years ago.

While the businessman reiterates he continues to be bullish on pharma, the share of financial services is growing in the overall pie of Piramal Enterprises. At present, 47 percent the Piramal Enterprises revenue comes from financial services and is set to increase even further.

Piramal dismissed reports that he wants to sell the contract pharma business. "I don't want to comment on speculation." And reiterated that the pharma analytics business — which was also rumoured to be on the block — is once again on a growth path. "In the long run, it's a good business," he says.

It's clear though that Piramal is looking at the financial services to fuel the company's growth. "Growth is relatively easier in financial services.If you have the capital you can grow. In a growing economy like India there is always need for funds," he says.