Tough times ahead for NBFCs: Piramal's Sridharan

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Subscribe to enjoy similar stories. Mumbai: Piramal Capital & Housing Finance Ltd (PCHFL) is expecting challenging times for non-banking finance companies (NBFCs) as bad loans build up in small ticket and microfinance loans, said Jairam Sridharan, managing director. In an interview with Mint, Sridharan said that the NBFC remains cautious about asset quality deterioration.

"Asset quality environment has been tough over the last few years, especially in the last two quarters. Initially, the deterioration began with small-ticket loans, then credit cards, and later with microfinance lenders. It’s like a series of dominoes falling one after another, which usually signals contagion or some risk spread across the market.

It’s a time to be very cautious, and we have been cautious for the last year and a half. Tougher times may lie ahead for NBFCs, but we are prepared," he said. The holding company Piramal Enterprises saw its gross non-performing assets rise to 2.7% in the first quarter from 2.4% in the fourth quarter.

The non-bank lender had taken a hit in its consolidated profitability for fiscal 2024 with the company reporting a loss of ₹1,684 crore compared to profit of ₹9,969 crore at the end of fiscal 2023, owing to elevated credit costs in the legacy accounts. "You have to separate the legacy business from the growth business. The growth business is robust, delivering about ₹200 crore profit in the quarter.

We’re happy with its stability and continue to expect progression on that trajectory," he said. "The legacy business however, will always be somewhat volatile due to cleanups. That said, we believe the days of major volatility are behind us as the legacy book has become smaller." PCHFL has been focussing on growing its