Non-banking finance company (NBFC) Shriram City Union Finance plans to raise around Rs.1,000 crore issuing debentures and through other debt this fiscal to achieve a growth of around 25-30 percent over the next couple of years, a top company official said Wednesday.
"The fund raising is expected to happen sometime this year to support the company's target. The company will continue to grow its non-corporate book size in a focused manner," G.S. Sundararajan, managing director, told reporters here.
Going by the growth plans, the company would need around Rs.2,500 crore for the next 2 to 3 years.
Sundararajan said the company will be the growth driver of the Shriram Group in the coming years with a focused thrust on non-corporate or micro, small, medium enterprises (MSME) sector.
He said 17 percent of the country's gross domestic product (GDP) is contributed by the MSME sector comprising of around 2.6 crore business units.
"The lending risks attributed to MSME sector is not as large as it is made out to be. The cost of finance for MSME is very high from the banking channels," he said.
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According to him, the government should first make the banks to lend to the non-corporate sectors and then look at tightening the norms for NBFCs than the other way around.
"If the latter happens then the non-corporate sector will lose the one main source of finance," he added.
For Shriram City Union, the non-corporate sector loan constitutes around 46 percent and the company wants to grow it to 60 percent.
According to Subhasri Sriram, executive director and chief finance officer, getting a credit rating in a way acts against the interests of MSMEs.
"The rating agencies largely depend on data on paper which the MSMEs do not maintain. The net result is that the rating agency would give a lower credit rating. The banks in turn would charge a higher rate," she said.
Asked about the quantum of fixed deposits raised by the company, Sriram said it is less than Rs.1 crore.
Though the company would look at a mix of funds - securitisation, banks, debentures and fixed deposits- the latter is not very cost effective as compared to other sources.
She said Shriram City Union securitises around 12 percent of its loan book at an average.
On the reduction in gold loan portfolio, Sriram said the company took a conscious decision to move away from the segment last September itself much before the fall in the prices of yellow metal happened.
About the housing finance subsidiary, Sriram said the company had sanctioned Rs.220 crore till date and the focus was on tier-I and tier-II cities.
For the first quarter of the current fiscal, Shriram City Union has posted a net profit of Rs.117.42 crore, logging a growth of 34 percent over corresponding period of the previous year.
The total income from operations stood at Rs.788.37 crore, up 17.22 percent as compared to Rs.672.58 crore during the first quarter of 2012-13.