With the slowdown in the two-wheeler segment expected to continue, Shriram City Union Finance is shifting focus to, and pushing, MSME and personal loan products to drive growth.

“Full year (growth) guidance was anyway between 18-20 per cent on an optimistic note. Of this, the outliers would be SME including the larger entities, and personal loans,” said MD and CEO, YS Chakravarti. All personal loans are to existing customers, which have a track record with the company, and the segment is growing well, he told BusinessLine.

‘Contraction in yields likely’

Asked about the impact on margins in a rising interest rate regime, Chakravarti said that there could see “some contraction” in yields in the coming quarter. There is also expected to be some reduction in the NIM in FY23, but it will be contained at 10-15 bps, he said.

Two-wheeler loans

Growth in the two-wheeler segment for Shriram City Union Finance is expected to stay muted 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 disbursements, which could be elevated due to increase in fuel or vehicle prices.

“We always monitor the number of vehicles sold and it very clear the number has not picked across segments, whether it is rural or semi-urban or urban areas,” he said, adding that this, in a large part, was due to rise in cost of necessities, vehicles and the cost of running the vehicle.

This has made consumers reluctant to replace their existing vehicles and they postpone the purchase of new vehicles, which is also leading to pre-owned vehicles getting pricier, Chakravarti said.

Crowding by new lenders

He added that the two-wheeler loan segment has also seen crowding by the entry of new lenders—banks and non-bank lenders—as two-wheeler loans look like an attractive segment. “Your business may not be taken away but growth is muted because of both the demand and new players coming in.”

“It is not that our two-wheeler AUM has de-grown. Even if it grows by 3-5 per cent, we are okay. The focus will be on the rest of the products,” he said, adding that the company is confident of maintaining the share of two-wheeler loans at 20-22 per cent of the total portfolio.

Merger update

The non-bank lender recently received the CCIs approval for its proposed merger with sister company Shriram Transport Finance. Chakravarti said the company is now awaiting the go-ahead from National Company Law Tribunal, which should come by end of September.

Ahead of the merger, Shriram Group had launched a pilot project to cross-sell products of both the companies across 50 branches. This has so far generated leads of about ₹50 crore, and is now being extended to a total of 500 branches, Chakravarti said.

Demand slow for gold loans

Gold loans are the easiest product to cross-sell through this project, as per which the infrastructure for gold loans has now been set up at over 100 branches of Shriram Transport Finance. The company had also recently launched gold loans across several branches in north Indian states. While demand has so far been slow, Chakravarti expects this to pick-up post the merger.

“The idea is that once the merger is completed and we start offering gold loans in all STFC branches also, we will start advertising. We need to be seen on a larger scale and start advertising,” he said.

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