Shriram Group’s non-banking financial entities are more likely to be merged by the third quarter of this fiscal year, according to a senior company official. Chennai-based Shriram Group had 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 that we need two more approvals. One from CCI and another from Irdai, which we should see coming soon. eight to ten 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 loans to two-wheelers, gold loans, working capital loans to general clients from the Shriram Transport Finance Company (STFC).
“…So 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 everyone that can meet any type of financial need,” 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 stock 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 SCUF caters to, Chakravarti said the company is doing well as disbursements in the first quarter ended June this fiscal nearly doubled.
“In the last quarter of June, we made a disbursement of Rs 4,560 crore out of which about Rs 1,000 crore was for two-wheelers and an additional Rs 1,100 crore for MSMEs. Another odd crore of Rs 1,400 was intended for, among other things, gold loans.
“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 disbursing about Rs 7,913 crore 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 haven’t had much of an impact on the company’s customer base, the official said, as the majority of funding is for the trade and service sector.
“Inflation and rising interest rates haven’t affected them as much as they have in manufacturing. Second, we are seeing good demand for credit from the sector and expect an increase in disbursements over the next three quarters, primarily to MSMEs. The good thing is that the note size has also remained unchanged, our average note 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 green shoots in June, we will have to see how it goes in terms of two-wheeler sales, sales are down, they have not returned to pre-COVID levels,” he said. -he declares.