Earlier this week, the 124-year-old Godrej group unveiled a new arm called Godrej Capital Ltd (GCL) to pursue its ambitions in the financial services sector. GCL is the holding entity for Godrej Housing Finance (a housing finance company) and Godrej Finance Ltd (a non-banking financial company). The Godrej group has committed to invest Rs 1,500 crore in capital into GCL, which aims to build a Rs 30,000-crore balance sheet by 2026.
In a wide-ranging interview with DH’s Veena Mani on Thursday, Godrej Capital Managing Director and Chief Executive Officer Manish Shah talked about its startup-like mentality, expansion strategy, plans for the affordable housing space, thoughts on the HDFC twins’ deal and its hope to go public. Edited excerpts.
You began your housing finance business in the midst of the pandemic. How big are your non-performing assets? What has your focus been and how do you see it changing? Are you looking at funding real estate companies too?
We, thankfully, do not have any NPAs and we escaped the moratorium on loans due to the pandemic. Secondly, our focus has been retail loans and we would like to have it that way. Our assessment of the pricing of that risk, there is a mismatch. They were priced much lower. We do not want to take that risk. We are good at retail loans, so we will stick to it. We do not want to get into it just because there is an opportunity.
We are a start-up and we’d rather take retail risk because we understand it better and grow in a segment we know instead of getting into something just because there’s an opportunity.
How do you plan to grow your business?
Our near-term goal is to grow our geographic footprint. We want to spread to 11 city operations, especially expand in the South to cities like Hyderabad and Chennai. We will expand to six cities this year and increase our footprint every year. We want our product portfolio to grow to affordable and unsecured lending.
We want to reach an AUM (assets under management) of Rs 30,000 to Rs 35,000 crore in the next three to four years. We want a more balanced portfolio of premium housing, affordable housing and loans against property.
In the next three years, I see these segments contributing 1/3rd each to our portfolio. At present 70% comes from premium and rest is loan against property
How do you see the HDFC twins’ deal affecting you?
First of all, we are not even a David in the David vs Goliath game. We have the backing of a strong brand behind us. Having said that, what will keep players like us is innovative products like our ‘Design your EMI’ one. They will definitely grow the industry. When the leaders grow, we will automatically grow. From the liability side, we are happy because we have one less competitor in the liability base. They already have one, so some of the sources like mutual funds and term loans are open for us. It is a distinct advantage. They will get bigger and (have) better geographic reach. Historically, when the big guys grow, the smaller ones have innovated on the back of that growth. We do not lack low-cost funds because of our group. We do not lack the arsenal. But we will deliver value to a smaller cluster of customers and then grow. That would be our focus in the first ten years. Our focus will also be to keep our liquidity under check.
You just laid out your plans for the decade. GCL Chairman Pirojsha Godrej recently said that you will look to list in six years. Why?
Listing Godrej Capital would help unlock the company’s value and it will happen between the four to seven-year horizon. Listing it will tell us our real value.
That is why we want to list apart from the fact that it will give us access to public funds which is extremely important for us.
It will also give us public visibility.
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