The appointed date of operations for the merged entity – Shriram Finance Limited, which would be the largest retail finance NBFC in the country, is expected to be April 1, 2023, said YS Chakravarti, MD and CEO, Shriram City Union Finance.

In an interview with BusinessLine , Chakravarti, who would be the MD and CEO of the merged entity, talks about plans for scaling up operations following the merger and says there is no plan to apply for a bank license. Edited excerpts:

There is a lot of competition in retail lending. What are your plans with the merged entity?

The core product for Shriram Transport Finance Company (STFC) is commercial vehicles. As the economy keeps improving, the demand for both used and new commercial vehicles should pick up. Shriram City Union Finance has MSME or micro-small business funding, which is seeing renewed demand for credit with the economy improving.

Today, we offer gold loans only in five States. We would like to take it pan-India with the help of the network of STFC. Even in the MSME business, we have a very strong presence in the South, particularly Tamil Nadu, Andhra Pradesh, Telangana, Maharashtra and to some extent Gujarat, but we have not really scaled up too much in the rest of the country. Now with the merger, we have the STFC team joining and it will be easier for us to scale up MSME funding going forward.

Also read: Shriram Capital, Shriram City Union Finance to merge with Shriram Transport Finance Company

What is the timeline for the merger?

It should take anywhere from nine to 10 months. The appointed date or the date we’re looking at for operations would be April 1, 2023.

How does the succession plan announced recently fall in with the merger?

Thyagarajan made the statement to clear doubts in the market and amongst analysts on the succession. In reality, the governing board has been there for quite some time and it’s been a consultative process all along. So, it’s a coincidence. At an operating company, nothing changes. The advantage for an operating company now is that we can depend on people for their experience and you know expertise.

What happens to the housing finance and insurance arms post the merger? Will these be monetised?

Housing finance will continue as a subsidiary of the merged entity – Shriram Finance. We are not looking at monetising it. We may look at a public issue probably once it reaches an AUM of ₹7,000-8,000 crore.

In the insurance business, people keep coming and talking to us but nothing concrete has happened. If we get an interesting offer for dilution, probably the holding company or the insurance companies may take a call but I don’t think they are in a hurry to do it.

Will the merged entity apply for a banking license?

No. The cost of operations in a bank compared to an NBFC is much higher. As an NBFC, I can be faster. I can actually reach a customer faster so I can you know lend the faster, I can do so many things I can’t do as a bank. If and when the regulator maybe pushes us, then we may think but it’s a no as of now.

Is there a conflict of interest with the Piramal Group holding stake as it is working on its retail lending plans?

No, in the combined listed entity, they will have an 8.5 per cent stake, so what conflict will they have? They had also invested in this business much before they started anything. I don’t think we should be worried about conflict.

How do you see credit demand after the festive season?

We are seeing good demand for credit from MSMEs, gold loans are doing well. In the two-wheeler segment, urban has picked up, rural has not yet picked up. But we expect it to pick up in probably in the fourth quarter.

I think we are past the impact of the second wave of the pandemic because I can see that happening both in the collections as well as demand for new business. The barometer is always the improvement in collections and then you know that demand is only a matter of time.

Also read: Shriram Properties IPO subscribed 4.6x

When will the Super App be launched? Will you look at entering the payments space?

We are working on it and it should probably be ready in six to nine months. We should be able to launch it by the time the merger is completed. On payments, we are in talks with a few fintech for partnerships.

Would the merger mean rationalisation of staff?

Definitely not. The way we are planning and the growth that we have planned for, we may actually end up recruiting more people. And as a philosophy, Shriram is people first. The only surplus that may happen will be in the back office and there we already have a plan on reskilling this team.

Related Topics
comment COMMENT NOW