De-risking exercise: Piramal reduces exposure to residential real estate

Piramal Enterprises has reduced its exposure to residential real estate, as part of its strategy to de-risk its portfolio. 

Piramal’s exposure to Lodha has reduced to Rs 3,180 crore from Rs 4,300 crore in October 2018, and it plans to reduce it further to Rs 2,600 crore by September 2019, said Khushru Jijina, managing director of Piramal Capital & Housing Finance, in an earnings call with investors. Since March this year, exposure to Lodha has dropped by over Rs 700 crore, of which Rs 532 crore was from down-selling to Goldman Sachs and the balance through repayments and pre-payments from the company itself, said Jijina. 

Piramal Capital, the financing arm of Piramal Enterprises, has a loan book of Rs 56,605 crore, which grew 20 per cent year-on-year in the June quarter. Jijina said exposure to Mumbai-based Nirmal group is down to Rs 7 crore now from the peak of Rs 200 crore. He said Piramal completely recovered its loan from another firm LG Yardscape. Piramal has been reducing exposure to real estate and increasing the share of non-real estate since the September quarter of FY19, to de-risk its portfolio. Non-banking financial companies, including Piramal Capital faced a liquidity crunch after the IL&FS default last year.

Developers have also seen liquidity crunch since August last year, as NBFCs stopped lending to them. This, coupled with lower sales, have hit developers badly. The overall share of real estate loans dropped to 63 per cent in March last year, while the share of retail loans rose to 11 per cent.