Pidilite Industries Enters NBFC Sector to Provide Small-Value Retail Loans

Adhesive and construction chemicals manufacturer Pidilite Industries is entering the NBFC sector by acquiring a promoter group firm. The company will be limited to providing small-value retail loans to people related to its ecosystem, said Managing Director Bharat Puri on Thursday.

Deepening Loyalty and Connect

Puri said that this move would help deepen loyalty and connect in the workman ecosystem and also enable premiumisation and financial return. However, he also clarified that the company would conduct its NBFC business at arm's length, with no connection to the main business of Pidilite.

Target Audience

Pidilite, the makers of Fevicol, Dr Fixit, Fevikwik, and M-Seal, is entering the lending business by acquiring an existing NBFC, Pargro Investments, belonging to its promoter group. Puri said that the company would focus on providing loans to its ecosystem, which consists of a large number of users and dealers, such as furniture contractors, plumbing contractors, masons, Kothi contractors, tile layers, and dealers for plywood, hardware, sanitary, and paint.

Small Bursts of Capital

Puri said that the company believes that its ecosystem needs small bursts of capital at certain periods of time, and Pidilite is best equipped to service this need. He clarified that the company does not intend to become a large-scale NBFC, but will remain restricted to the Pidilite ecosystem where it believes it has a competitive advantage.

Initial Plans

Pidilite will start by piloting the NBFC business in one geography to test its assumptions and understand how it works. The company plans to invest up to Rs 100 crore in tranches over the next two years to build the new business, through an optimum mix of equity and debt. Puri emphasized that the loans will be limited to the dealer-contractor universe and will not include large-ticket items. These loans will be designed to provide a bump-up in working capital for small businesses.

Previous Ventures

Earlier, Pidilite Industries had made a foray into the paints segment with the launch of Haisha Paints in select geographies. On Wednesday, Pidilite Industries reported a 35.76 per cent increase in consolidated net profit to Rs 458.53 crore for the second quarter ended on September 2023. Its revenue from operations was up 2.15 per cent at Rs 3,076.04 crore.

Pidilite Industries' entry into the NBFC sector is a strategic move that aims to deepen loyalty and connect within its ecosystem. By providing small-value retail loans to its customers and dealers, the company hopes to enhance premiumisation and financial returns. The company's initial plans to pilot the business in one geography and invest up to Rs 100 crore over the next two years indicate a cautious approach to this new venture.