In Conversation With,Y S Chakravarti Managing Director and CEO Shriram City Union Finance Limited
Y S Chakravarti
Managing Director and CEO Shriram City Union Finance Limited
“We Have Grown in Terms of Our Software Capabilities”
What is your outlook on the Indian NBFC sector? With economic activity picking up pace, what are the emerging trends and opportunities you are witnessing in the post-pandemic world?
Rising credit growth places non-banking financial companies (NBFCs) in a good position. In addition, NBFCs have managed their asset quality very well in recent times despite the headwinds posed by the pandemic. The rising demand for credit is across segments, and is seen to be particularly strong in retail and MSME which are areas of specific strength for NBFCs. In addition, there is encouraging demand in hitherto underpenetrated asset classes such as credit cards. Thus, overall, NBFCs are in a position to capitalise on catering to the country’s credit requirements. Of course, NBFCs will have to contend with a rising interest rate environment, but most strong non-banks have the means to absorb some portion of higher interest rates so as to not let the situation affect the demand for credit.
SCUF reported a 23 per cent rise in its consolidated net profit at ₹383 crore for Q2FY23. What factors are responsible for your strong financial performance?
Shriram City Union Finance (SCUF) registered its highest-ever quarterly disbursements of ₹8,020 crore in Q2FY23 due to the rising demand for small business finance, two-wheeler loans and loans against gold which contributed to the strong profitability. SCUF has consistently been clocking new highs in its disbursements over the last four quarters. Apart from this, asset quality continued to improve significantly on a sequential basis, including that in the September 2022 quarter and so the loan loss provisioning was also lower. All this contributed to higher PAT. It must however be remembered that the September performance also has had the advantage of being a ‘normal’ quarter unlike the previous year which was affected by the second wave of the pandemic.
Could you throw light on your plans to further expand your branch network in the northern region? How do you expect your geography-wise revenue mix to evolve over the next 2-3 years?
SCUF now has a reasonable presence in North India with approximately 13 per cent of its current network being present in that geography. Further, the northern states now contribute more to certain products such as two-wheeler loans than any other geographical grouping. That said, we are in the process of rolling out other loan products in the northern region and have already introduced gold loans and MSME loans.
The impending merger with Shriram Transport Finance Co. Ltd., which will then lead to the constitution of Shriram Finance Ltd., will augment our network in the north. The product mix over the next 2-3 years will then probably evolve as more diverse in North and Central India than it is currently while the South and West India will continue to lead in certain products such as MSME loans for some more time. We are still relatively new to East India and will probably consolidate our two-wheeler presence there in the initial phase.
Can you highlight how you are leveraging new technologies and making the best of the wave of digital adoption?
We have made steady progress in our digital initiatives. We were early movers in adopting technology to make our two-wheeler loan journey smoother, especially in the areas of customer verification, payments and receipting, We have since added contactless two-wheeler loans to the product mix. We then introduced digital personal loans and are now working on processes that would help us disseminate gold loans remotely. In addition to this, we have a dedicated team that is working on creating a digital suite of loan products that would mirror our existing offline offerings. We should be able to introduce some of these products by the middle of FY24. On the liabilities side, we already have a healthy contribution to our retail fixed deposits from our online FD programme.
At the moment, what are your top three strategic priorities?
People, first and up front. We have, over the years, had the good fortune of retaining critical human resources, and we hope that this trend will continue because we possess among the best customer-facing teams in the industry. The second priority would be to expand our product footprint over a larger portion of the country, thereby adding to our profitability metrics as well as enhancing employee productivity. Lastly, we would work intensely towards reducing our cost both in terms of cost of funds and investment in technology.