MSME, gold will grow faster than any other segment: Shriram Finance CEO

"Multiple people have shown interest (in Shriram Housing Finance), including the who's who of the private equity world"

India’s largest retail non-banking financial company (NBFC) - Shriram Finance - is seeing micro, small, and medium enterprises (MSMEs), gold and personal loans as keys to unlocking its growth potential. The company’s Managing Director and Chief Executive Officer Y S Chakravarti, in conversation with Shine Jacob, talks about its expansion strategy, plans to sell stake in the housing finance arm, and the road map to achieving assets under management (AUM) of Rs 2 trillion.

Edited excerpts: 

Do you have plans to sell 15 per cent stake in Shriram Housing Finance?

We have not decided on the 15 per cent figure. We had infused about Rs 500 crore as capital before the merger. In the next nine to 10 months, it may need capital the way its business is growing. The debate is whether we should infuse more capital or invite a partner. Multiple people have shown interest, including the who’s who of the private equity world.

Your present-day AUM is about Rs 1.77 trillion. When do you expect it to touch Rs 2 trillion?

In 2021-22, we were at Rs 1.57 trillion. As of December, we were at Rs 1.77 trillion. Probably by the end of the next financial year, we may breach Rs 2 trillion.

Being the largest NBFC, what is your strategy for growth, after a successful merger last year?

We will not defocus from our core, which today as a combined entity is vehicle finance. That will continue, but as individual products, MSME and gold will grow faster than any other segment. Add personal loan to this. In the personal loan space, we are by and large focused on our internal customers who have completed a cycle. These three will grow faster than the rest of the sectors - be it commercial vehicle (CV), passenger vehicle (PV) or two-wheeler. The MSME sector has close to Rs 18,000 crore of AUM.

Today, we have access to unexplored geographies because of Shriram Transport Finance Company’s network and its team. That gives us the confidence to launch MSMEs in newer geographies. The focus geographies will be Uttar Pradesh, Bihar, Madhya Pradesh, Jharkhand, and Rajasthan. We are also exploring parts of Odisha and West Bengal. These are areas where we do not have much of our existing AUM coming from small and medium enterprises (SMEs).  

The idea is that in the next nine months, we want to cover SMEs in all the branches. Gold may not be available at all the branches for feasibility issues.

Does this mean that the share of CVs, which is about 51 per cent of AUM, will come down?

By 2024-25, we will be taking this to about Rs 26,000 crore in MSMEs. Each of these focus areas will be growing anywhere between 2 per cent and 3 per cent.

The market has picked up for CVs. We are very close to pre-pandemic levels. With spending on infrastructure segments by the government, the CV market will see healthy growth. We hope that by the next financial year, replacements will start happening. More used vehicles will also come into the market.

CVs may go up from 51 per cent to 52-53 per cent, whereas PVs and construction equipment will come down with new segment share increasing. 

What is the status of your super application (app)?

Starting April, we will be testing it. By June, we will try to make it available to customers. Via the app, customers will avail of all our products and also enjoy the benefit of other service providers we will tie up with.

We are also awaiting permission for Unified Payments Interface (UPI) so that the customer can conduct payments through the app. Possibly by the end of April, we may get the clearances for UPI.