Money & Banking

Aided by two-wheeler loans, Shriram City sees strong growth in Q3 disbursements

G Balachandar Chennai | Updated on December 14, 2020

Shriram City Union Finance Ltd, a leading NBFC in the retail financing space, will see its disbursements doubling in Q3 when compared to the preceding quarter, aided by strong growth in two-wheeler loans and return of business to pre-Covid levels in most of the other loan segments.

For the company, disbursement levels are slowly coming back to pre-Covid-19 levels, barring the SME (small and medium enterprises) segment, which is expected to take at least another quarter to reach normal levels.

“We should actually double the disbursements in Q3 when compared to Q2. In the September quarter, we did about ₹3,000 crore of disbursements. We have already done more than ₹4,000 crore in October and November put together. In two-wheelers, we have already done about ₹1,600 crore so far in this quarter against ₹900 crore in Q2. In the SME segment, we have done about ₹600 crore when compared to ₹360 crore in Q2,” YS Chakravarti, MD and CEO of Shriram City Union Finance Ltd, told BusinessLine.

The company disbursed ₹1,000 crore in the two-wheeler segment as the company financed 1.66 lakh two-wheelers in November. While it financed 10.41 per cent of the two-wheelers sold during the month, this was the first time the company’s disbursements surpassed the ₹1,000-crore-mark in a month. About 95 per cent of the disbursements in this business was for commuter segment bikes in rural- and semi-urban markets.

He said the company has already raised about ₹1,500 crore in the last two months, and some more sanctions are in the pipeline. Overall, Shriram City, a deposit-taking NBFC, may raise about ₹2,000 crore in Q3 to take care of repayments and disbursements.

“One good thing is that the liquidity position has eased now, while securitisation and term loans are happening, the bond market has not come back and may take a quarter,” added Chakravarti.

On the collections side, concerns are behind now, particularly on the SME borrowers’ category. This is mainly due to the recovery of SME borrowers, who are mostly in the service and trading businesses, and these have recovered better than manufacturing SMEs, which are still struggling. The company will touch about 95 per cent in collections this month, indicating return to pre-Covid-19 levels.

Gold-loan business

On the gold-loan business, which is being done in non-South India regions, Chakravarti said the company was not pushing it too much as of now. “We may end up with Q2 disbursements level of ₹1,500 crore or marginally higher. We have done about ₹1,100 crore in gold loans so far in this quarter. Presently, there are 20 gold-loan branches, and we may have operations in another 50-60 locations by the end of this fiscal,” he added.

The company is expected to end this fiscal with a flat or marginal increase in AUM (asset under management) this fiscal. The first half saw AUM drop by about 5.3 per cent.

Chakravarti said there were no big takers for loan restructuring, and probably it may do restructuring for about ₹200 crore. “Accounts from hospitality, hospitals, schools and some manufacturing are likely to opt for restructuring,” he added.

Published on December 14, 2020

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