Shriram City Union Finance made a net profit of R127 crore in Q1. What is your lending strategy going to look like now
We reduced our gold loan book in Q1 and we had begun reducing this portfolio from last year. But I think the top line on both two-wheelers and MSME has been growing significantly and we have almost 25% growth in both these segments today. This year, we should have a 30% growth in both portfolios. We have a loan book size of R16,000 crore, where two-thirds of the book is MSME and two-wheelers.
The gold loan book is about 14% of the total. It was about 44% about two years back and we have consciously brought it down by tightening the loan-to-values on them. But we wanted gold loans to be at about 20%, now I think we have to bring it back from 14% to 20%. Though, today, we have a very small market share, we definitely want to grow at about 30% in two-wheelers. MSME has always been our focus because of our chit fund customer base. We're at about 18% penetration in the country today. We at least want to double that in 2-3 years so that we can grow our MSME book. In terms of branches, we are expanding in the North, West and East. We have already opened about 150 branches in the North and West. We were 98% concentrated in the South a few years back and, now, its 85%.
Last time when the company applied for a universal bank licence, you had raised some concerns. Now that there are new guidelines on payment banks and small banks, what are your plans
We have studied the guidelines on differentiated bank licenses and asked for some clarifications from the Reserve Bank of India (RBI). So, once the final guidelines come in October, we will see if there is an opportunity for us to start a small bank in a particular geography and expand. Our preference will be a small bank. The new norms are a lot more favourable to us than the previous universal bank guidelines. But we need some clarifications like what geographies they expect us to get into.
The guidelines say contiguous districts or states. If its only going to be 2-3 districts, we may not be interested and it may take ages to be profitable. I think the interpretation is that its going to be at least one state you can operate in. We are strong in Tamil Nadu, Andhra Pradesh, Maharashtra and Gujarat from a brand equity and customer base standpoint. So, any of these states we can go for.
Are you looking at expansion in your insurance business How are you going to go about it
We are looking at overseas expansion in general insurance through our partner Sanlam. And since Sanlam, Piramal and Shriram are partners at the Shriram Capital level. We are looking at aggressive growth over the next year. We've been profitable in the life insurance business from day one, we have a strong partner in Sanlam and had internal channels for distributions through which we were able to reduce cost.
As of now, we are scanning the Asian market to see in which countries can we have the kind of opportunity we want. We may, at best, go into two or three countries. We're looking at nations like Vietnam, Indonesia, Thailand, Myanmar and Sri Lanka. They're all nascent markets where we can make our mark. We're looking at medium-to-small-sized business to grow inorganically who we can actually work with. In a year, we'll have a concrete road map on where we need to go. Sanlam has a requirement to have 30-40% ownership in these companies and a ticket size of about
As part of financial inclusion, a number of non-banking finance companies are looking at white label ATMs. Are you looking at this too if the small banks dont work
We studied white label ATMs when the RBI came out with the regulations last year. We did not find it too advantageous to us as we were in the midst of the banking application. So, we decided to wait on that, but we may have to take a relook at it and see if it makes sense to us. It could be a good alternative for our customers to actually have ATM facilities in our own branch. White label ATMs may make sense, we just have to look at the cost of handling.