Shriram City to focus on small biz, gold loans in FY23; aims 18% AUM growth

Shriram City Union Finance will focus on personal, gold and small business loans to achieve its 18 per cent growth in AUM in the current fiscal year amid a slowdown in demand for two-wheelers due to shortage of components and other factors, a top company executive said.

Noting that the demand in the economy has not yet fully recovered, while rural and semi-urban areas have been doing better now, Y S Chakravarti, MD & CEO, said majority of the company's business comes from semi-urban and rural markets and anything good for the rural economy will help the company's business.

"Our focus will be on personal loan, gold loan and small business loans. In terms of economic recovery, we have not recovered fully. Urban areas are still struggling, to some extent the rural economy has picked up probably because, one the harvest has been good and in current year also there is good rainfall prediction,"Chakravarti told PTI in an interaction.

He said the crop harvests and also the prices are likely to be good because of the demand globally. "If you look at wheat today, it is selling higher than the MSP. So, I expect the rural economy to do well. But there is still distress in urban areas," he said.

The overall demand scenario for the company seems good, however, demand for financing in the two-wheeler category is subdued for a lot of reasons, Chakravarti said.

One reason is that, the cost of acquisition has gone up tremendously. Today, on an average it is costing close to Rs 1 lakh for ownership of a two-wheeler.

Besides, the cost of maintenance has also gone up because of petrol prices, he said.

"The sense we are getting is that people are actually also not replacing their old vehicles. The feedback I am getting from my team is lots of people are getting their old vehicle repaired and using them. So all are conspiring to lower the sale and lowering the demand for two-wheelers.

"So looks like we are going to see this trend for another six months also. Fortunately we were able to hold the share in the market, it is 6.5-7 per cent of the total sales in the market and we are able to hold that share," Chakravarti said.

Talking about electric vehicles, he said that the demand for EVs was okay till March but in April the sales were down probably because of the scare due to a few vehicles catching fire or battery issues.

So there is a slowdown in EV two-wheeler demand and it will take some time for the psychological fear to go away before demand picks up and also that some of the manufacturers are recalling their vehicles.

All this is adding to a sense of worry in people's mind, he added. Besides, some of the popular models of two-wheelers are not available in the market due to chip shortage, the official said, adding the tightening of freight rates as well as shortage of containers too are acting as dampeners.

"Because of Covid, pile-ups happened and containers got stuck at ports during Covid period. Freight rates have gone up tremendously. I think all these are pushing the scarcity of vehicles."

He said the company wants to grow the MSME business in states like Madhya Pradesh, Chhattisgarh, Uttar Pradesh. "So these are the states where we will focus on our MSME business."

The company is also seeing good demand in the gold loan front and that the disbursals in gold loans is steadily going up, barring slightly down in Q3 (October-December 2021) because of the festival season. However, it has come back now, he said, adding in the semi-urban and rural areas, the market has picked up. People are in need of money also.

"Most of my gold loan disbursals has happened in semi-urban and rural areas." The company will expand the gold loan business by offering the products from its existing branches in Punjab, Rajasthan, Haryana and Delhi.

"I am not setting up new branches but gold loan will be made available in the existing branches of Shriram City Union Finance and also Shriram Transport Finance, once the merger is complete," Chakravarti added.

"So the idea is that we should be functioning from at least 2,000 plus outlets in the next 24 months." He said the company targets to grow its assets under management (AUM) by 18 per cent in the current fiscal year.

"The two-wheeler industry estimates that it will grow at about 5 per cent this fiscal. If industry grows by 5 per cent, we will grow at about 10 per cent, normally that is what we do. So for my AUM to grow at 18 per cent, we need to focus on other products which will be business loans, gold loans and to some extent personal loans to my existing customers," the official said.

Chennai-based Shriram City of the Shriram group, is India's largest two-wheeler financier. The company's consolidated disbursements in FY22 rose 49 per cent to a record high of Rs 28,879 crore backed by a strong revival in micro, small and medium enterprises (MSME), gold and two-wheeler loans. Assets Under Management (AUM) grew 15 per cent to Rs 38,541 crore at end of March 2022.