 "Piramal Finance plans to foray into gold loan business for growth")
Piramal Finance, the lending business arm of Piramal Group, is planning to enter the gold finance business. This comes after L&T Finance and InCred group forayed into the sector in February.
Investment banking sources said Piramal Finance is open to acquisitions, though it is not involved in any talks.
The company is active in housing finance, used-car loans, and business loans.
The gold loan segment in India has seen three transactions this year -- two for business acquisition and one for joint control -- reflecting the attractiveness of high-yield business and a backdrop of rising price of precious metal.
Some more transactions in this space may be on cards.
The Piramal group did not respond to an email regarding its prospective entry plans.
Its Piramal Finance retail assets under management (AUM) stood at ₹59,093 crore at the end of December 2024.
Senior NBFC executives said the growth pattern of gold loans and microfinance shows an interesting trend. Whenever the supply is restricted in micro finance institutions and other small ticket loans, the gold loan business has seen a growth.
“When market dynamics is not conducive to unsecured space, the hunt is on for a secured granular book based on which the company can expand the borrower base and get into a product which is safer. That is why everybody is looking at the gold loan segment,” said the top executive of NBFC.
A M Karthik, co-group head, financial sector ratings at Icra, said despite being gold loans backed by the highly liquid collateral, it is taken as if it is a consumer loan and priced accordingly.
He added that those wishing to enter the business are looking for existing gold companies or gold loan businesses as it will help reduce the time to market.
These gold loans are predominantly short-term credit. The target population for unsecured loans, microfinance, and gold loans is common.
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