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Religare Enterprises, with a book size of about ₹12,500 crore, is hopeful of a turnaround of the SME sector, which comprises a major portion of its lending business.
Sunil Godhwani, Chairman and Managing Director, said that for the last two years, Religare has kept the book size stagnant. Instead, the focus was on improving quality, letting maturity come in and, most importantly, ironing out mismatches between assets and liabilities.
“Look at my PAT. It has grown significantly over 20 per cent a year with about the same book size — we brought in a lot of efficiencies internally. We could have increased the book size. But then the challenge would have been to manage the NPAs,” Godhwani said.
SME financingOn how the SME sector was coping with increased operating cycles and costly financing, he said that the finance cost is only going to come down. The rates need to come down to make it far more workable for the SMEs, he feels. He maintained that as of now, the feel-good factor has not translated into action and the translation could happen in this quarter.
“We need to differentiate between stress and opportunity. Stress is because of the environment, while non-performance is because of the intent of the people. If we break down the NPAs, there are very few whose intent is to default. So, if you see my book size my GNPA is not very significant — ₹300-odd crore. Anyway, we have provisioned for that knowing fully well that the money will come back sooner or later.”
Godhwani added that there would be write-offs but they would be very insignificant in the context of the book size. “Every industry will have that and we factor in those numbers when we are building the business,” he said. Godhwani said Religare got out of funding many businesses such as construction equipment and auto and it has been a positive for the company.
The exposure has been downsized quite a bit and there were no challenges for the company now.
Immediate plansReligare is now geared up to fund about ₹400 crore a month, half of which is coming back. Net growth will be about ₹2,000 crore, which is the positive side, he said.
More importantly, ₹200- 250 crore coming back shows that SMEs have been working even during stress.
On how secure his lending to SME is, Godhwani said Religare underwrites cash flows and backs it up with the assets as additional collateral.
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