Shriram Group’s non-banking financial entities are most likely to be merged by the third quarter of this fiscal year, according to a senior company official.
Chennai-based Shriram Group has announced the merger of two Non-Banking Financial Companies (NBFCs) in December 2021, which will create the country’s largest retail NBFC with a combined assets under management (AUM) of over Rs 1 .5 lakh crore and a distribution network of over 3,500 branches.
Shriram City Union Finance Ltd (SCUF) has received shareholder approval for the merger and is expected to soon obtain approval from the Insurance Regulatory and Development Authority of India (Irdai) and the Competition Commission of India (CCI). said CEO YS Chakravarti.
“The next step is, we need two more approvals. One from ICC and another from Irdai, which we should see coming soon. For the National Company Law Tribunal (NCLT) to make a final order, we are waiting eight to 10 weeks. So 8 to 10 weeks is when we can get the order (from NCLT). And once we get the order, we can consider it legal (combined entity), Chakravarti said. to PTI in an interview.
“So hopefully, if all goes well, the December quarter should see a merged balance sheet,” Chakravarti said.
The name of the combined entity will be Shriram Finance.
“We will also have to do all the rebranding,” said Chakravarti, who is also the managing director and CEO designate of the proposed merged entity.
He further stated that the merger will provide the ability to reach more customers, the ability to bring the products to new geographies where the company does not have a presence, and to sell cross-products such as two-way loans. wheels, gold loans, working capital. loans to general customers of the Shriram Transport Finance Company (STFC).
“…Thus, your ability to cross-sell and the ability to increase productivity. Your sales team will be equipped with more products. So basically, a one-stop platform for all, which can meet any type of ‘financial requirement,’ the official said.
SCUF offers loans for two-wheeled vehicles, commercial vehicles, passenger vehicles, gold and real estate, while STFC is active in commercial vehicle financing, consumer credit, life and general insurance and securities brokerage.
STFC has branches in Bihar, Rajasthan, North East, West Bengal and Odisha, however, SCUF does not have a strong presence in these states.
After the merger, the combined entity, Shriram Finance, will have five Joint Managing Directors (JMDs) who will be the five geographic heads. While two JMDs will come from SCUF, three will come from STFC.
Once the merger process is complete, Shriram Group will have five different financial entities dedicated to lending, life insurance, general insurance, brokerage and asset management. “So you have five separate companies,” he added.
Speaking on the current demand scenario in the market that SCUF caters to, Chakravarti said the business is doing well as disbursements in the first quarter ended June this fiscal nearly doubled.
“During the last quarter of June, we made a disbursement of Rs 4,560 crore of which approximately Rs 1,000 crore was for two-wheelers and another Rs 1,100 crore towards MSME businesses. Another odd Rs 1,400 crore was towards gold lending etc. If you compare that to the first quarter of the current year, we’re actually close to 100% growth last year there was an impact of COVID during the months of April and May. So this quarter (Q1FY23), we ended up doing around Rs 7,913 crore disbursement compared to over Rs 4,500 crore last year,” he added.
Breaking it down, he said disbursements to two-wheelers were worth Rs 1,800 crore this quarter (June 2022) and on the MSME side it was around Rs 2,053 crore.
On the interest rate hike scenario, he said SCUF is also considering raising lending rates on a few loan products.
Inflation and rising interest rates have not had much of an impact on the company’s customer base, the official said, with the majority of funding going to the trade and services sector.
“Inflation and rising interest rates have not affected them as much as they have in the manufacturing sector. Secondly, we are seeing good credit demand from the sector and we are looking at increased disbursements over the next three quarters, mostly to MSMEs. The good thing is that the ticket size also remained unchanged, our average ticket size is between Rs 10 and 12 lakh on the MSME side,” Chakravarti said.
This means that the increased payout did not come because the company increased the ticket size.
Furthermore, he said that there is good demand for credit from Tier II and III cities, especially from MSMEs and the gold lending front.
However, on the loaner two-wheeler front, overall sales are still down. “There are some green shoots in June, we’ll have to see how it goes in terms of two-wheeler sales, sales are down, they haven’t come back to pre-COVID levels,” he said. -he declares. .