Shriram Finance — created out of the merger of Shriram Transport Finance, Shriram City Union Finance and ex-holding firm Shriram Capital — has become operational from Monday and is looking at growing its non-vehicle financing book faster going forward.
The company is heavily dependent on used-commercial vehicle finance and its overall vehicle finance vertical contributed 77.5 per cent of its over Rs 1.71 lakh crore loan book now.
The new company wants to take this proportion down to 60 per cent over the next two-three years and pare it further down to 50 per cent over the next five years or so, management led by Umesh Revankar, executive vice-chairman, and Y S Chakravarti, managing director & chief executive of Shriram Finance, told reporters here announcing the operationalisation of the new entity.
The employees-owned Shriram Group had last December announced merger of Shriram Transport Finance which is the industry leader in used vehicles finance, and its NBFC arm Shriram City Union Finance, creating the country’s largest retail non-banking finance company (NBFC) Shriram Finance with over Rs 1.71 lakh crore of assets under management and a net worth of Rs 40,900 crore and net income of Rs 2,900 crore in the first half the current fiscal.
In FY22, its net income stood at Rs 3,500 crore. Shriram Capital was the holding company of these two operational entities.
The new company, to be headquartered in Mumbai, has over 6.7 million customers being served at over 3,600 branches across the country, barring Nagaland, by its 57,000 employees, 3,000 of them hired since merger announcement.
“Shriram Finance is the largest retail NBFC today with a loan book of over Rs 1.71 lakh crore and 6.7 million customers. While announcing the merger last December, we had guided towards 15 per cent top line growth and 10 per cent bottom line expansion and I am happy to say we’re very much on course to improve those guidance,” Revankar said.
On the back of the improvement in the overall economy, the company has been witnessing exponential growth in the key business verticals. While overall loan sales has grown 35-45 per cent since the merger announcement, the flagship commercial vehicle vertical has risen 46 per cent and the construction equipment finance soared 64 per cent during this period, Revankar said.
Though the company is sanguine about the construction equipment finance segment to grow faster on the back of the government push on infra, Chakravarti said, however, the firm wants to balance the growth metrics and pare the dependence on vehicle finance vertical going forward.
Giving the asset break-up, he said 60.5 per cent is from used vehicles (commercial vehicles), 17 per cent from passenger vehicles, MSMEs constitute 11.5 per cent, personal loans 3.2 per cent, gold loans 2.8 per cent and 5.3 per cent come from two-wheeler financing. Of the commercial vehicle portfolio, as much as 99 per cent is for used vehicles only, he added.
Chakravarti insisted that while the company tries to balance the asset portfolio, it will strive to grow all the business segments — financing commercial vehicles, MSMEs, personal loans, gold loans, or vehicle loans — as the market demands.
And going forward Chakravarti wants to take gold loan portfolio to 10-12 per cent, by offering the facility across all its branches, from being a limited branch offer only to existing customers. Similarly, he wants to expand the MSME book massively. But he didn’t quantify a portfolio size for this.
However, Chakravarti ruled out getting into consumer finance, MFI and also co-lending with fintech players for faster growth.
While Shriram Transport Finance is the largest financier of commercial vehicles (mostly used vehicles), Shriram City Union Finance is the largest two-wheeler financier and a leader in micro, small and medium enterprise lending.
Revankar, who has been leading Shriram Transport Finance for decades, said the merger is a natural culmination of a journey of 43 years.
“With the balance sheet strengthened through the merger, we can serve the needs of the market better now by bringing in more products and help customers with faster access to credit,” he added.
The Shriram group was founded by R Thyagarajan in 1979, but today the ownership is with a trust whose members are the group employees. The promoter group does not take any benefits from the group companies not even royalties.
The group also has a life and general insurance verticals, a realty arm, a chit fund, asset management, stock-broking, distribution of financial products, and wealth advisory services.
At combined level, the Shriram Group has an overall customer base of over 22.5 million, around 79,100 employees and 4,000 branches. Its net profit stood at Rs 5,360 crore on an asset under management of over Rs 2.16 lakh crore as of March 2022.
Shriram Finance also announced the appointment of Jugal Kishor Mohapatra as chairman of the company and Maya Sinha as an independent director.