The RBI has not cleared Shriram's application for a banking license in this round. Will you look at applying again?
Piramal: The issue of banking licence was never a consideration when we decided to invest into Shriram group. This is my personal view that banking licence is not as attractive as it is made out to be. A bank may not make money for the first 10 years. I am happy that Shriram Group has taken a very conservative view of banking. Most people outside think we will replicate existing private banks but that does not happen. The guidelines for the licences this time are different. I would have been worried if a banking license was granted to Shriram under the present guidelines. I can actually now sleep at peace in the night
Thyagarajan: We are not obsessed about banking licence. We made our application to the RBI but its guideline regarding on merging bank with non banking finance business in eighteen months is not practical. We asked for an exemption but it has not happened. RBI governor Raghuram Rajan has spoken about differential licences. As and when the RBI comes out with guidelines on it we will look at it.
What was the need for Shriram Capital to raise funds from Piramal considering that the company and its subsidiaries are doing quite well?
Thyagarajan: Shriram Capital is growing quite rapidly and it requires fresh funds to expand our business. A half of funds infused by Piramal will be used by the company in its businesses. All our underlying businesses are doing very well. The life insurance and general insurance businesses were able to make money in the first year itself.
What is so exciting about this deal ?
Piramal: If India has to progress the financial sector has to grow. Shriram group is present in those areas where growth will be higher. They (Shriram group) have a good team, a good organisation and a stable management. They are in right sectors and with consistent record. Look at the second hand commercial vehicle financing they are market leaders. Many companies tried to beat them but have not succeeded. Look at their insurance business. They are profitable from first year
What are the prospects of NBFC business now and how do you see the transition from a pharma company venturing into various business areas
Piramal : Our economy is capital starved. The banking sector has a large over hang of NPAs. The RBI has got tougher. Banks are hesitant to lend. Many do not have enough capital. Can the government keep funding them? As far as such companies are concerned even public markets are not supportive. It is then institutions like ours can meet the funding gap. There are solid reasons for entering the Shriram group and I am excited about it. As far as our financial business is concerned it is now tied up with Shriram group and I am confident it will create long term value.
How will Piramal investment help in growing Shriram group?
Thyagarajan : I think the coming together of entrepreneurial talent will help us to build bigger and better institutions. It will bring support to venture in business areas which our people may have thought as adventurous. Just to give an example expanding insurance business in Thailand. There is a hesitation from our side as we are not entrepreneurs. This could change now.
Piramal already has a full-fledged financial services business. Will that compete with Shriram and what kind of opportunities do you see in the financial services?
Piramal: Our NBFC business is not competing with Shriram group. We have a private equity fund and a real estate fund which is investing in the big ticket infrastructure projects. We see a lot of opportunities in the Indian economy and once the economy picks up pace, the financial services business will grow at an average rate of 17%. The Indian economy is starved of capital. The banks are stretched and are unable to reach customers. There is a great need for financial products in this country and Shriram with its 53,000 employees and Rs 78,000 crore of assets under management is in the right place to exploit this opportunity.
How optimistic are you about revival of Indian economy?
Piramal : I am optimistic. About 65 percent of India's population is below 35 years. Every Indian is aspiring that the next generation will do better. The growth rate in India has come down to half than what it was. This can not continue. There are too many forces within the country which will push the growth rate. It will happen especially if we have a stable government which is decisive and which believes that economic growth can be brought about by entrepreneurs. Poverty will come down. This is not about the rich and poor.
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