Initially positioned as a captive lender to cater to the needs of Pidilite Industries’ existing base of contractors and dealers, Pargro Investments , the non-banking finance company arm is the latest business addition of the leading adhesive manufacturer.
“The reason for our success is our user base and the demand (for the NBFC) will be from our user base,” explained Bharat Puri, Managing Director, Pidilite Industrie in a media briefing when asked about the rationale for entering the lending business. “Nobody knows them better than us and we have their KYC (know your customer) and borrowing patterns”.
A capital commitment of ₹100 crore as a combination of debt and equity will be deployed into the NBFC arm over two years.
The pilot version of the lending venture is expected to be rolled out in the next 6 – 9 months. Without naming the location, Puri revealed that a ‘small south market’ is being considered for the project.
Taking small steps
Puri reiterated that Pidilite will start small to understand the market and will restrict the business to the Pidilite ecosystem. “It’s not a big bang thing and we are not in a hurry. We would just be taking small steps,” he said when asked about the growth and business plans for the NBFC.
Pargro will finance small ticket loans to the dealers and contractors of Pidilite and the company intends to put in a system to monitor the end use of such loans.
According to Puri, the lending arm will deepen loyalty, customer base and premiumisation for Pidilite. However, considering that the competitive advantage is the customer information, which it intends to keep as its proprietary, Pidilite wants to explore the financing business in-house instead of partnering with existing players.
Pargro Investments Private Limited, an entity belonging to the promoter group will be transferred to Pidilite. Since Pargro holds an NBFC license, the adhesive major needs to make a fresh application, though the transfer process would require approval from the RBI.
Pargro does not have any lending operations and is debt-free as on October 31, 2023. It shall be acquired by Pidilite through a wholly owned subsidiary under a share purchase agreement on or before March 31, 2024.