From a time when it was unable to get the right attention from regulators and lenders, Shriram Housing has earned their respect in just three years, by doing the right things. In a conversation with BusinessLine, MD & CEO, Ravi Subramanian, narrates the company’s journey in doubling the loan book to Rs 6,000 crore during this period. Edited excerpts:

Starting out as a tiny subsidiary of Shriram City Union, to becoming the fourth largest affordable housing player worth Rs 6,000 crore , how would you describe your journey? 

Exhilarating to say the least. We underwent a total overhaul in 2019, when we hired a quality leadership team. Four years back nobody even gave us a chance. When I went to the regulators after taking up this role as MD & CEO, I was told to look at what the other companies are doing, their analytical skills, business skills, etc. I returned dejected.

But it struck me that what they were saying was right. We had a lot of work to do to catch up with the rest. So, we started by cleaning up our portfolio. We studied the competition and found that while most of the affordable housing finance companies were regional players, we were spread across 18 states, and were not dominant anywhere. So, we cut our presence to six focus states, mainly the ‘L’ belt – Rajasthan, Gujarat, Maharashtra, Karnataka, Tamil Nadu and AP and Telangana.

We relooked at our target customer segment and moved to the affordable home loan segment of Rs 14–15.5 lakh from Rs 11–12 lakh, bringing down our yield to 12–13 per cent, which is reflected in a reduction in potential risk. We transitioned from centralised to decentralised underwriting and upskilled our regional people. We started focusing on customers with bureau scores.

Today, the average credit score of our customers is around 740. Only 7–8 per cent of the customers are new to the bureau. We started going after collections passionately, tracking every single new loan that we underwrote. From January 2019 to March 2020, not a single account has gone delinquent. The first delinquent account was during Covid. 

How has Covid impacted your books? 

Almost nil, since 90 per cent of our book has originated post-2019. The NPAs which were elevated at 6–7 per cent in 2018, are now down to 0.92 per cent. From having the worst portfolio among all HFCs four years back, my asset quality today is superior to that of my peers, driven by my changed collection strategy, approach and underwriting.

The new book is running at about 0.25 per cent NPA. We have started expanding in a few other states. As part of a large financial conglomerate present in almost every corner of the country, we started an initiative called ‘Griha Poorti’. We have placed a Shriram Housing Finance sales executive in SCUF and STFC branches to originateloans from the employees, their references, walk-ins, agents and in the catchment area of that branch. As of June, 16 per cent of our home loans come from that channel. If we decide to roll it out across 3,600 branches of the group in the next 2–3 years, we will be the largest affordable housing finance player. 

Is becoming the largest player your aspiration? 

The largest player has an asset size of Rs 14,000 crore, while we are at Rs 6,000 crore. The gap in disbursement is narrowing. The target is to grow my book close to Rs 8,500 crore in this fiscal year, which will take me a few steps closer to the market leader. 

That said, I do not want to grow at the cost of asset quality. Safe lending is a safe landing. I would make sure that I manage credit underwriting well, even if it comes at the cost of scale. That is one lesson I’ve learnt. If you are too caught up with scale, you will have problems, because no matter what technology you use, underwriting is still about that personal contact. A big roadblock for us is the availability of skilled people. The industry is struggling to find talent. So, yes, I aspire to make Shriram Housing a large and significant player in the industry – not necessarily the largest, but the best. 

What are the new segments you are looking at? 

We are launching home loans for under-construction builder properties. It’ll take us six months to build it right. The gains from this business will be small in FY23. In FY24, however, we will see a big jump with Rs 400–500 crore of business from this segment. We will only fund properties that are over 50 per cent complete. Our focus will be self-construction properties in Tier-2 and Tier-3 cities.

Competition in the affordable housing finance has increased a lot. Does it bother you? 

Affordable housing has become so cool these days because of the valuations. But it’s not everybody’s game. Housing is a long gestation business. So, if you get into housing finance and stay for 15 years, and build a good business, you will make decent profits, whether in affordable housing or not. Over the next few years, I expect a shake-up in the affordable housing finance space. Only those with good lineage, backed by larger groups or strong investors, will survive.

Would you want to be a listed company at some juncture? 

Yes. But the reasons for listing must be right. Just because some PE-backed housing finance company is listing at an AUM of 5,000 crore, is not a reason for us to list Shriram Housing. Being a listed entity does add a lot of value in terms of raising money from the market and attracting talent. It enhances the overall stature of the organisation. So listing is inevitable, but when the time is right.