While the downturn in the two-wheeler segment is expected to continue, Shriram City Union Finance is focusing and pushing MSMEs and personal loan products to drive growth.
“The full-year (growth) forecast was anyway between 18 and 20% on an optimistic note. Of these, the outliers would be SMEs, including large entities, and personal loans” , said managing director and CEO, YS Chakravarti.All personal loans are for existing customers, who have a history with the company, and the segment is growing well, he said. Activity area.
“Probable contraction in yields”
Asked about the impact on margins of a rising interest rate regime, Chakravarti said there could be “some contraction” in yields over the next quarter. Some reduction in the NIM is also expected in FY23, but it will be contained to 10-15 basis points, he said.
Growth in the two-wheeler segment for Shriram City Union Finance is expected to remain subdued as the sale of two-wheelers has not picked up, Chakravarti said. He added that the number of vehicles sold is a better barometer than cash outflows, which could be high due to rising fuel or vehicle prices.
“We are still monitoring the number of vehicles sold and it is very clear that the number has not increased in all segments, whether rural, semi-urban or urban,” he said. , adding that this, in large part, was due to increase. the cost of basic necessities, vehicles and the cost of running the vehicle.
This has made consumers reluctant to replace their existing vehicles and they put off buying new vehicles, which also drives up the price of used vehicles, Chakravarti said.
Invasion by new lenders
He added that the two-wheeled lending segment has also seen a huge influx with the entry of new lenders – banks and non-bank lenders – as two-wheeled lending appears to be an attractive segment. “Your business may not be taken away from you, but growth is being slowed due to both demand and the arrival of new players.”
“It’s not that our two-wheeled AUM has degenerated. Even if it increases by 3 to 5%, everything is fine. The focus will be on the rest of the products,” he said, adding that the company is confident to keep the share of two-wheeled loans at 20-22% of the total portfolio.
The non-bank lender recently received ICC approval for its proposed merger with sister company Shriram Transport Finance. Chakravarti said the company is now awaiting the green light from the National Company Law Tribunal, which is expected by the end of September.
Prior to the merger, Shriram Group had started a pilot cross-selling of the two companies’ products in 50 branches. This has so far generated leads of around ₹50 crore and is now expanding to a total of 500 branches, Chakravarti said.
Slowdown in demand for gold loans
Gold loans are the easiest product to sell through this project, according to which gold loan infrastructure has now been set up in over 100 branches of Shriram Transport Finance. The company had also recently launched gold loans in several branches in northern Indian states. While demand has been slow so far, Chakravarti expects it to pick up after the merger.
“The idea is that once the merger is complete and we also start offering gold loans in all STFC branches, we will start advertising. We need to be seen on a larger scale and start advertising,” he said.
August 03, 2022