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Private equity-backed IndoStar Capital Finance expects stronger performance this fiscal with a growth of more than 30 per cent in disbursements and doubling of its assets under management (AUM).
With all its 120 branches becoming fully operational this year, the company expects its retail business – comprising vehicle finance, home loans and SME funding – to record significant growth, with vehicle finance being the key growth engine.
The company has now hit a monthly loan run rate of about ₹600 crore, up from ₹300-350 crore last year.
It is hopeful of maintaining the current level of growth, and is expected to end the current fiscal with total disbursements in the range of ₹7,000-8,000 crore, up from ₹5,400 crore in 2017-18, and AUM of ₹12,000-13,000 crore, up from ₹6,200 crore in FY18.
Corporate lending
In the total disbursements for FY19, corporate lending business is expected to account for 50 per cent, and the remaining portion will be accounted for by the three segments under retail business.
The vehicle finance business, which the company started in December 2017, operates out of more than 100 locations in 15 States and its present run rate is ₹100 crore per month. The monthly rate of its SME business is ₹125-150 crore, while home loans’ monthly average is ₹50 crore.
“These three constitute the retail loans; so retail loans are going to be ₹300-350 crore per month,” according to a conference call transcript, which quoted R Sridhar, Executive Vice-Chairman & CEO, IndoStar Capital Finance.
The company will target all types of commercial vehicles under its vehicle lending business. The company believes that the outlook for the CV industry is bright for the next three years with the start of upturn in truck sales. The government’s proposed scrappage policy is expected to result in huge replacement demand.
Sridhar indicated that with the current rate of performance, the company would be able to achieve breakeven for all its 120 branches by the end of this fiscal.
“It takes about ₹10-12 crore AUM for each branch to break even. So, from the current traction of business, which these branches are doing, we are confident that these branches will break even during this financial year. We will focus on the profitability of these branches first and then look at further expansion,” said Sridhar.
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