Money & Banking

Shriram City expects to return to pre-Covid levels by Q2

Shobha Roy Kolkata | Updated on August 11, 2021

NBFC aims to ‘aggressively push’ gold and two-wheeler loans, says CEO

Shriram City Union Finance (SCUF) expects to return to the pre-Covid level of disbursements by the second quarter of this fiscal, backed by a steady pick up in demand across two-wheeler loans, loan against gold, personal loans and MSME finance.

According to YS Chakravarti, MD and CEO, Shriram City Union Finance, the company is looking to “aggressively push” two-wheeler as well as gold loans. While it also plans to push personal loans and SME loans, it will continue to remain cautious and prefer to lend to its existing customers.

“We normally do disbursements worth ₹6,500-6,600 crore during a quarter. We disbursed close to ₹2,000 crore in July alone, and we hope to register close to ₹6,000 crore during the second quarter of this fiscal,” Chakravarti told BusinessLine.

Also read: Shriram City, STFC raise ₹2,000 crore through retail fixed deposits in July

The NBFC had registered disbursements to the tune of ₹4,560 crore in Q1 FY22. While on a year-on-year basis it was higher by around 244 per cent, sequentially it was down by around 31 per cent when compared to ₹6,570 crore in Q4 FY21, due to lockdowns and limited business activities. However, things have been improving since June-July this year and the trend is expected to continue moving forward.

Sector-wise growth

As on June 30, 2021, Assets under Management (AUM) was ₹29,599 crore. The share of small enterprises finance came down to nearly 49 per cent of the AUM as on Q1 FY22 against 58 per cent in the same period last year.

The share of two-wheeler loans increased to 23 per cent (21 per cent); loan against gold was up at 15 per cent (10 per cent) and personal loans increased to eight per cent (six per cent) in the same period.

“NBFCs catering to MSME on the manufacturing side have been affected. Strategically, we work with the trading community; call it providence or the heritage (of the company), a majority (nearly 80 per cent) of our exposure has been to the trading communities and SMEs engaged in essential services, limiting the fallout due to Covid.

“But we are still cautious about this segment. Nearly 70-75 per cent of our lending is to the existing customers,” he said.

Also read: Shriram Housing Finance Q1 net profit up 82%

However, the company expects the share of SMEs to increase to 50-55 per cent of total business in the next two to three years, given the “immense scope for lending” and shortage of available funding options for the sector.

Nearly 80-90 per cent of the company’s two-wheeler loan book is in Tier II and rural markets, where the customers are either self employed or own small business. Nearly 98 per cent of the funding is for commuter vehicles and not high value bikes so the delinquency is low, he said.

GNPA

The company’s gross non-performing asset (GNPA) increased sequentially to 6.91 per cent in Q1 FY22 from 6.37 per cent in Q4 FY21; however, on a year-on-year basis, it improved from 7.28 per cent in Q1 FY21.

With collections improving on a month-on-month basis, the GNPA should pull back to March levels. “The NBFC’s collection efficiency in May was around 86 per cent; it went up to 93 per cent in June and in July it was almost 100 per cent,” he said.

Also read: Shriram City Union Finance Q1 net up 8% at ₹208 crore

SCUF’s restructured book stood at ₹39 crore as on June 30, 2021. It is likely to restructure accounts worth ₹40 core to ₹50 crore by September this year.

The company, which has a strong presence in South and West India, is looking to strengthen its footprint in UP and Bihar. Plans are afoot to grow its network and presence in the eastern States of Odisha and West Bengal post December this year.

Published on August 11, 2021

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