Ajay Piramal on opportunities and competition post HDFC's exit, says buyback is to reward shareholders

Piramal Enterprises Chairman Ajay Piramal believes that with HDFC merging into HDFC Bank, there are opportunities in the real estate lending market for existing companies.

“The competition for lending to real estate with HDFC moving away from this market is now reduced and therefore there are opportunities," Piramal told CNBC-TV18 in a post-earnings interaction.

Aside of the results, Piramal was in the news for announcing a share buyback, its first after a 12-year gap. The company looks to buyback 1.4 crore shares or 5.87 percent of the total equity at Rs 1,250 per share through the tender offer route. The buyback price is a premium of 16 percent to Friday's closing price.

Piramal said that there are two aspects to the buyback. One is better utilisation of equity and the other is to reward shareholders that have been with the company. He also spoke about whether the company would need more equity post the buyback.

"After this buyback, our debt equity only goes to 1.3 times. Therefore, even if I take a growth of 20-25 percent for the next 4-5 (years), I don't think we will need any more equity," Piramal said. "So, in that sense, this is better utilisation of the equity. It's also a reward to shareholders who have been with us."

Piramal's promoters will not be participating in the buyback. Should you, as a retail investor tender your shares in the buyback? Read this piece for more.

"When the company needed the money, that is in 2018-2019, we did the right issue and the promoters fully subscribed to that and at that time, we put in about Rs 2,500 crore into the company. Now we feel it is time for individual and minority shareholders to take advantage," Piramal explained the rationale behind the promoter non-participation.

By bringing in Wholesale 2.0, Piramal clarified that the company is not moving out of the wholesale business. "We are significantly reducing the old wholesale loans," Piramal said, adding that this is being done to assuage investor concerns that the quality of the old wholesale loans is not good. "Its difficult for us to challenge that," he said.

The new Wholesale 2.0, according to Piramal, already has a book size of Rs 3,500 crore. He further added that the company wants to go into areas where the banks do not want to go.