Shriram City Union Finance, a deposit-taking non-banking finance company of Chennai-based Shriram Group, expects quarterly reduction in its gross NPAs going forward, and also a sustained growth in two-wheeler and SME loans supported by its entry into newer geographies.

It had set a target to bring down the credit cost to 3 per cent from 4.1 per cent in March 2018.

“We have already done that, and we were under 3 per cent as of Q3,” V Lakshmi Narasimhan, Executive Director, Shriram City Union Finance, told BusinessLine . Elaborating further, he said the credit cost will drop as it plans to do more of cross-selling in the personal loan business, which is contributing to growth in the loan book.

“Here, we are doing the cross-sell only to the chosen customers who have behaved well in the past. More of this content will also clean up the portfolio,” he added.

Also, the loan book acquired through its new underwriting model, is performing well. The more of that forming the loan book, better the quality. “These three will contribute to the overall reduction of gross NPAs as we move forward,” said Narasimhan.

Two-wheeler market

Though the present conditions in the two-wheeler market are tight due to the huge inventory, the top lender for two-wheelers is optimistic of growth opportunities.

The company has not tapped the eastern markets so far. States such as West Bengal account for about 5 per cent of the two-wheeler sales in the country; Jharkhand, Bihar and Uttar Pradesh (UP) are being mapped by the company for the next growth curve.

“UP is the largest State for two-wheeler sales in the country, and we are the lead financier there. But we have only 80-85 branches, and that market is yet to grow,” he added. Also, increasing two-wheeler finance penetration will come in handy for the company to take advantage of the opportunity. The financing penetration in southern States is about 40 per cent, while it is 18 per cent in UP.

“If the two-wheeler market grows by 9 per cent, we will grow at 20 per cent. If it grows by 5 per cent, our growth will be 12 per cent,” he said.

SME loans

As the company expands to newer markets, the route will also be made clear to sell SME loans subsequently.

“Most of the two-wheeler buyers in those new markets are also self-employed, a key constituent in our SME portfolio. So, we see a clear runway for maintaining 20 per cent growth in SME loans,” he added.

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