Few bet their personal wealth on financial services like the way Piramal Enterprises chairman Ajay Piramal has done. The industry is in the grip of fear over valuations and funding. In an interview with ET, he shares his views on how it may be time to turn irrational exuberance into sanity. Edited excerpts:
You had said that a time will come to separate men from boys in the non banking financial services industry. Has the time come?
On August 30, we had a half-day session on financial services where we had more than 300 investors, fund managers and analysts participate. What I had said was, ‘I fear if one NBFC fails, the whole sector will be painted with the same brush.’ That has happened now. First of all, IL&FS is not an NBFC. If you look at the total loan exposure, the NBFC is Rs 20,000 crore where balance Rs 80,000 crore is in infrastructure, in power, roads, waste management and other places. The NBFC is not an issue and we need to distinguish that in the market. It is much more than an NBFC.
How bad is the situation compared to the 2008 crisis?
In 2008, there was no liquidity in the market. Today there is no liquidity crisis. It is more a crisis of confidence. That is different from not having money to lend.
You had looked at IL&FS in the past. Do you believe about the charges being made about its books?
I don’t want to talk about one company. We look at many companies. We have non-disclosure agreements with the companies that we look into. In the financial space, the only company we have invested in is the Shriram Group. We were comfortable with what we saw, with the promoters and with the business.
Was the current collapse waiting to happen?
I have been saying this for 6-8 months. I expected it because of the way people have been lending and the quality of underwriting. IL&FS is not because an NBFC has failed, it is because the whole investment in infrastructure has not been realised. Their investment in other sectors are not giving them return.