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Shriram City Union Finance crossed a milestone in the first quarter of the current financial year, when its net profit crossed the Rs 100-crore mark for the first time in its history.
The Chennai-based non-banking finance company made a net profit of Rs 103.40 crore on a net operating income of Rs 371 crore. Each share earned Rs 19.10.
Shriram City Union Finance (SCUF), part of the Shriram group, gives gold loans, loans for small businesses and for purchase of passenger vehicles. The company manages loan assets of Rs 13,800 crore.
In a chat with Business Line today, SCUF’s Executive Director and CFO, Subhasri Sriram, said its strength lay in originating and managing small loans. (The average ticket size is Rs 7 lakh.) The strength comes from the company’s capability to assess the typical small borrower, who may neither have proper balance-sheet based records of his business, nor projections for the future. SCUF is able to assess such customers because its employees know them well.
But is this model scaleable? Sriram said while the model could not be scaled up overnight, it could be gradually. She said the financial needs of small businessmen do not get exhausted after the first loan, they keep coming back for more loans as their business grows.
Still, there are opportunities in tapping new markets too. “When we go to a new market, our first job is not to find the right borrowers, but to find the right employees,” she said.
Entry into a new market, she said, is something SCUF does very slowly. For instance, the company would have its employees give only two-wheeler loans, where there is lesser need to assess the borrower than in the case of business loans. Over the next couple of years SCUF would learn about the repaying patterns of the customers, and then start giving other kinds of loans.
SCUF takes a good four years of learning in a new market before it starts ramping up operations there, Sriram said. SCUF, she said, has tested this model in Gujarat.
On the BSE today, the SCUF share was up Rs 1, and closed at Rs 706.
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