Shriram Finance plans to expand its supply chain and irrigation books in the next few years. MD and CEO YS Chakravarti tells Anupreksha Jain that the majority of stress in the personal loan segment is coming from the salaried class who use these for consumption. Excerpts:
By the end of the current financial year, what are your outlook on growth in AUM and net interest margins?
There is no specific target, but we would ideally like to grow at a rate of 15-18%. If anything happens beyond that, we are happy, but we are not striving to grow 20-25%. We would like to be conservative in our approach. On the NIMs side, we don’t see NIM changing dramatically, probably +/- 3-4 basis points, but I think we will be able to hold it there.
There has been a slight moderation in the growth of the personal loan and gold loan segment. Why?
This is a temporary slowdown in disbursements and for the next couple of quarters, it will continue to be slow due to tightening from the regulator. We are in discussion with the central bank to have a look at our books, then we again start pushing the pedal there. If you look at our personal loan portfolio, 95% of loans are given to our existing customers. That’s why I am not worried about my personal loan book as majority of loan is going to my two-wheeler customers and they are mostly self-employed or small businessmen. The stress is there in salary class personal loans taken for consumption. These are people who take a loan even to party. We don’t have any exposure to that kind of segment.
What about gold loans, why there has been a moderation there?
Earlier, we were under the impression that 75% LTV is at the time of entry, but RBI said it is at the time of exit. So, if the principal plus interest has crossed 75%, you are booking it as an NPA. Now, the banking regulator has said that we cannot even classify it as an NPA. So, you need to restrict yourself to lower LTV. So, we have changed our LTV norms and today, we don’t give 75% anymore. So, it is restricted to between 60 to 62%. I think we expect that probably by end of November disbursement should come back to normal.
Shriram Finance and Valiant Partners have entered into a share purchase agreement to sell their stakes in Shriram Housing Finance. What is the rationale behind?
In the housing finance segment, the AUM will keep on growing and every two years we need to pump in capital. There is only so much cash that I can take out of the parent company. Therefore, we decided to dilute the stakes. We are now better off using the money in the parent company. It will increase our capital adequacy ratio by 80 basis points.
Any further plans of capital raising or borrowing plans?
We will continue to borrow from the overseas market. We have applied to the RBI for issuing fresh bonds because we have crossed our 750 million dollars limit. If we get the approval, we will raise between 300 to 500 million this fiscal.
Are you planning to introduce more verticals?
Right now, we will be focusing on the supply chain and building a book on irrigation loans. We have actually created a separate vertical within the company for green financing. It includes everything which is green.