Shriram Finance (SFL) is the consolidated NBFC arm of the Shriram group. It is formed through the merger of Shriram Transport Finance (STFC), Shriram City Union Finance (SCUF) and Shriram Capital (SC).
The management has shared the following key pointers on the way ahead –
- In next 3 years, Vehicle loans will reduce from 77% of the total portfolio to 60%
- This will be due to greater growth in MSME and Gold Loans – currently accounting for 10% and 2.8% respectively
- Expects 15% CAGR in revenues.
- Growth will be targeted through product rollouts in the central, western and eastern India, where the Company traditionally has not been as strong as in the South.
- Expects Net Interest Margins (NIM) to be maintained at 8.3%
- Hope that SFL’s rating will be upgraded to AAA due to the diversification in the loan book post merger as against the concentration (vehicle loans) in the erstwhile STFC. This should reduce the borrowing cost by 40-50 bps, which currently stands at 8.6%
- Erstwhile STFC had a credit rating of AA+ and SCUF at AA
- There is no need of fresh equity currently. It is expected that growth can be managed through increase in the Deposits. Capital adequacy currently is 23.1%.
- The Company is also in talks with the potential investors who would buyout the Piramal Group’s 8.3% stake.