Shriram City to Focus on Small Business and Gold Lending in FY23; targets 18% growth in assets under management
Shriram City Union Finance will focus on personal, gold and small business loans to achieve its 18% growth in assets under management in the current fiscal year amid slowing demand from two -wheels due to component shortages and other factors, a company executive said. mentioned.
Noting that demand in the economy has yet to fully recover, while rural and semi-urban areas are doing better now, YS Chakravarti, MD and CEO, said the majority of the company’s business came from semi-urban and rural markets and everything good. for the rural economy will help business activity.
“We will focus on personal loans, gold loans and small business loans. In terms of economic recovery, we have not fully recovered. Urban areas are still struggling, to some extent, l The rural economy has recovered probably because once the harvest has been good and for the current year there are also good rainfall forecasts,” Chakravarti told PTI during an interaction.
He said harvests and prices are expected to be good due to global demand. “If you look at wheat today, it sells for more than MSP. So I expect the rural economy to do well. But there is still distress in urban areas,” did he declare.
The overall demand scenario for the company looks good, however, demand for funding in the two-wheeler category is subdued for many reasons, Chakravarti said.
One of the reasons is that the cost of acquisition has increased significantly. Today, it costs on average nearly Rs 1 lakh to own a two-wheeler.
Besides, the cost of maintenance has also increased due to gasoline prices, he said.
“The feeling we have is that people aren’t replacing their old vehicles either. The feedback I get from my team is that a lot of people are having their old vehicle repaired and using it. So all conspiring to reduce sales and reduce the demand for two-wheelers.
“So it looks like we’re going to see that trend for another six months as well. Luckily we’ve been able to maintain market share, it’s 6.5-7% of total market sales and we’re able to maintain that .share,” Chakravarti said.
Speaking of EVs, he said that demand for EVs was okay until March, but in April sales likely fell due to fear of a few vehicles burning or power issues. battery.
So there is a slowdown in demand for electric two-wheelers and it will take some time for the psychological fear to subside before demand picks up and some manufacturers recall their vehicles.
All of this adds to a sense of worry in people’s minds, he added. In addition, some of the popular two-wheeler models are not available in the market due to the shortage of chips, the official said, adding that the tightening of freight rates as well as the shortage of containers also act as shock absorbers. .
“Because of Covid, pile-ups have occurred and containers have been stuck in ports during the Covid period. Freight rates have increased enormously. I think all of this is accentuating the scarcity of vehicles.”
He said the company wants to expand MSME business in states like Madhya Pradesh, Chhattisgarh and Uttar Pradesh. “So those are the states where we are going to focus our MSME activities.”
The company is also seeing good demand on the gold loan front and that gold loan disbursements are steadily increasing except for a slight dip in the third quarter (October-December 2021) due to the festival season. However, it has returned now, he said, adding that in semi-urban and rural areas the market has recovered. People also need money.
“Most of my gold loan disbursements have been in semi-urban and rural areas.” The company will expand the gold lending business by offering the products from its existing branches in Punjab, Rajasthan, Haryana and Delhi.
“I am not creating new branches, but gold loan will be made available in existing branches of Shriram City Union Finance and also Shriram Transport Finance, once the merger is completed,” Chakravarti added.
“So the idea is that we should be operating from at least 2,000 outlets over the next 24 months.” He said the company aims to increase its assets under management (AUM) by 18% in the current fiscal year.
“The two-wheeler industry estimates that it will grow by around 5% in this financial year. If the industry grows by 5%, we will grow by around 10%, normally that is what we do. So in order for my AUM to increase to 18%, we need to focus on other products which will be business loans, gold loans and to some extent personal loans to my existing clients,” said said the manager.
Shriram City of Chennai-based Shriram Group is India’s largest two-wheeler financier. The company’s consolidated disbursements in FY22 increased by 49% to a record high of Rs 28,879 crore, supported by a strong recovery in lending to micro, small and medium enterprises (MSMEs), lending gold and two-wheelers. Assets under management (AUM) increased by 15% to reach Rs 38,541 crore at the end of March 2022.
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