Arulselvan D, President & CFO, Cholamandalam Investments & Finance Company (CIFC), has dismissed rumours about his company pursing an inorganic opportunity in the housing finance space. He has clarified that with the differentiation between HFCs and NBFCs thinning, the company won’t pursue obtaining an HFC licence any more. Edited excerpts:

Rumours around the speculated deal haven’t died yet…

We have clarified that it is not correct. We stand by that.

Are you also shutting down the possibility of adding anything inorganic to your business?

We have never followed the inorganic route to growth. We have always believed that we would grow organically. We have grown every business, every product and every sub-product organically. We have never taken over a company to grow known products. though we have taken over parts or segments of a business in which we do not have a presence, for instance, payments. Lending is our primary focus. We have the reach and capability, and we don’t need to grow inorganically in lending - that is our philosophy.

What is the status of the housing finance licence you had applied for about three years back?

Since we applied for the licence, the differentiation between a housing finance company and an NBFC has narrowed down significantly. Currently, it does not make a significant difference whether we are an HFC or not. Differentiations such as risk weightage and SARFAESI have become negligible, as most of these are extended to NBFCs themselves. So, there is no need to create another infrastructure or system to pursue that course. The second thing is, even without an HFC licence, we can still do that business, which we have been growing in the main company.

How large is your portfolio of home loans and loans against property?

Loans against property (LAP) is a separate segment that we started almost 14 years ago. We have grown the home loan segment, which is lending to purchase new homes. Since the need for a separate HFC licence has ceased to exist, we would not acquire an HFC for a licence.

Also read: NCD issuances by NBFCs, HFCs hit multi-quarter low in Q1FY23: ICRA

Will a bank licence interest you?

Today, regulatorily, we cannot be a bank because we are part of a conglomerate. That being the case, even if we wish to say ‘yes’, it’s not possible, unless the regulator creates that window of opportunity. .

Would you want to explore retail NCDs on a regular basis going forward?

If it is successful, we will certainly roll out. Our borrowing profile is Rs 1 lakh crore. It was sort of a benchmark for us that when we hit this number, we would go into other avenues of investor profiles, such as retail and maybe overseas funding. Growth aspirations need to be funded at some point, but for that funding source, we need to start building. We can comfortably continue to do what we’ve been doing ... that is borrowing from banks and mutual funds for the next three years. But we can’t in the third year start building what we will need for the future. We did only Rs 1,000 crore of retail NCDs, which is a very small number. Our monthly borrowing is much bigger than that. So we wanted to test, explore, learn, experience and understand this (retail NCDs). We want to make sure that we get this at the best possible price. For that I need to build the franchisee now. I am giving the retail public a slightly higher rate than what I may negotiate with banks. But it gives me the experience of handling this liability profile.

What is your comfort zone on margins?

On a total liability book of Rs 1 lakh crore, the marginal cost of increase to explore a new segment is bearable.

Last year you explored a lot of partnerships with fintechs. How are they working for you?

That was only for one small segment of one business. We will be exploring more and not, too, significantly high. Partnerships are less than two per cent of the overall book, and that’s the exposure. We are running the book tightly and quite comfortably now.

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