The Shriram Group, which has six listed companies, including Shriram Transport Finance and Shriram City Union Finance, is looking at aggressive expansion. GS Sundararajan, director at Shriram Group, spoke to Shashidhar KJ about expanding the insurance business overseas and plans for a niche bank.
Shriram City Union Finance made a net profit of R127 crore in Q1. What is your lending strategy going to look like now?
We reduced our gold loan book in Q1 and we had begun reducing this portfolio from last year. But I think the top line on both two-wheelers and MSME has been growing significantly and we have almost 25% growth in both these segments today. This year, we should have a 30% growth in both portfolios. We have a loan book size of R16,000 crore, where two-thirds of the book is MSME and two-wheelers.
The gold loan book is about 14% of the total. It was about 44% about two years back and we have consciously brought it down by tightening the loan-to-values on them. But we wanted gold loans to be at about 20%, now I think we have to bring it back from 14% to 20%. Though, today, we have a very small market share, we definitely want to grow at about 30% in two-wheelers. MSME has always been our focus because of our chit fund customer base. We're at about 18% penetration in the country today. We at least want to double that in 2-3 years so that we can grow our MSME book. In terms of branches, we are expanding in the North, West and East. We have already opened about 150 branches in the North and West. We were 98% concentrated in the South a few years back and, now, itís 85%.
Last time when the company applied for a universal bank licence, you had raised some concerns. Now that there are new guidelines on payment banks and small banks, what are your plans?
We have studied the guidelines on differentiated bank licenses and asked for some clarifications from the Reserve Bank of India (RBI). So, once the final guidelines come in October, we will see if there is an opportunity for us to start a small bank in a particular geography and expand. Our preference will be a small bank. The new norms are a lot more favourable to us than the previous universal bank guidelines. But we