Shriram Finance to enter supply chain lending, trade finance biz

One is discounting invoices on the technology platform as the group is already into small and medium enterprises financing

The Shriram group plans to foray into supply chain finance as well as trade financing and will scale up its loans against property (LAP) under the combined entity Shriram Finance.

Umesh Rewankar, executive vice-chairman and chief executive officer (CEO) of Shriram Transport Finance Company (STFC), said there are short-term lending opportunities on radar.

One is discounting invoices on the technology platform as the group is already into small and medium enterprises (SME) financing (under Shriram City Union).

Supply chain financing is an area of interest where there are many options. Finance companies can now participate in factoring.  Though funding is of short duration in these areas, the margins are good. There is an effort to build technology to enable it to participate in this business on a competitive footing, Revankar, who will be vice-chairman of the merged entity, told Business Standard. Last week, Chennai-based Shriram group announced that Shriram Capital (SCL) and Shriram City Union Finance (SCUF) will merge with STFC as part of business restructuring. The new entity will be called Shriram Finance.

Revenkar said another area that the company will look at is LAP. Most lending in the SME segment is backed by property (as collateral) and group entities have sufficient experience and exposure in this.

But he feels there is more business opportunity in this segment as Shriram City Union and Shriram Housing Finance have built expertise in understanding the property market and valuation.  

About rationalisation of the branch network for the proposed combined entity, Revankar said, in the last couple of months, teams have looked at structure and decided to map everything code-wise.

By the present assessment, only 45 branches may be rationalised in the first six months after the merger.

Post-merger the company would like to see where the scope is to open new branches. Shriram Transport Finance has 800 rural centres, which will definitely become branches.

Shriram City Union also has offices at nearly 600 locations. “In the case of Shriram City offices, we need to see location for addition,” he said. The branches will definitely come up in new locations and not crowd in the same geography to enhance reach.

The current business model is fully relationship-based. It will soon be partly a relationship and partly a technology platform, Revenkar added.