Godrej Group diversifies into financial services; commits to invest up to Rs 1,500 crore

The Godrej Group on Tuesday announced its foray into financial services, by committing to infuse up to Rs 1,500 crore in capital in its own mortgage finance company.

Godrej Housing Finance (GHF) will start by extending loans at 6.69 per cent, the lowest in the industry at present, and initially target customers buying apartments from the group’s realty arm Godrej Properties (GPL).

“We believe we have gained a good understanding about the real estate business and its intersection with finance and are entering the new business after a carefully thought strategy,” GHF’s Chairman Pirojsha Godrej told reporters.

Its newly hired managing director and chief executive Manish Shah, who joins the group from Bank of Baroda’s non-bank lending arm, said GHF will be aiming to make lending affordable, flexible, and fair to customers.

Shah said it is targeting to achieve a portfolio of Rs 1,000 crore by end of the fiscal in March 2021, and touch Rs 10,000 crore in assets under management within three years of the launch by having 40,000 loan accounts.

Godrej said the over 12-year-old group, which has interests in consumer goods, security products, defence and engineering, is committed to investing Rs 1,000-1,500 crore which will be needed by the business in the first three years.

It may look at getting an external investor on board after three years and an initial public offering in 6-7 years once the need for more capital arises.

Shah told PTI that plans to enter the business were afoot for over 18 months, and sought to downplay the concerns over the risks posed by the pandemic, asserting that its never a bad time to enter a fray.

Bad loans are made during good times and good loans are made during bad times, he said, pointing out that GHF’s strengths include a strong lineage which will make cheaper borrowings possible and also give cross-sell opportunities, and also the low housing loan penetration.

To start with, GHF will be operating in Mumbai, Delhi, Pune, and Bengaluru which occupy around half of the market and then gradually expand out, Shah said.

Godrej said the group would want to build the company organically and will not be interested to buy companies or portfolios initially. It may look at buying portfolios in a year’s time, Shah said.

It will launch loans against property products for small businesses by early FY22 and then get into cash flow based lending opportunities that exist on the back of the group’s ecosystem, Shah said.

Shah made it clear that retail will be the core focus for the company and it will not be entering the developer loan segment, where a slew of its peers have faced reverses.