Shriram Finance is currently exploring funding options for its subsidiary Shriram Housing Finance, says YS Chakravarti, MD and CEO. Chakravarti tells Ajay Ramanathan that the housing finance arm will continue to focus on affordable housing, rather than big-ticket loans. Excerpts:
What are your plans for Shriram Housing Finance? Will you be looking at an IPO?
We are actually looking at various options. Its assets under management are around Rs 8,000 crore now, and probably by the end of this fiscal, it will be at around Rs 11,000 crore. The leverage also will hit anywhere between 5.5 and 6 times. That means we need to give it capital – either internally or do a strategic sale of 10-20% stake or do an IPO. We have not zeroed in on any of these three options. Discussions are on. It may take shape in the next two-to-three weeks.
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Would you be better off infusing capital internally?
The IPO is a one-year exercise. The likely thing would be either an equity stake sale or an infusion internally. But for that, we need to discuss with investors and see what they feel. It could be a fresh issuance of shares rather than an offer for sale. We currently have an 85% stake in Shriram Housing Finance. On a diluted basis, our stake could come down to 70-75%.
The banking industry has seen strong demand for housing loans. Are you looking at expanding the large-ticket housing portfolio?
We are definitely not looking at large-ticket housing. We will be focused only on the affordable housing space till we cross Rs 15,000-16,000 crore in AUM. For the last six years, we have been focusing on affordable housing and have built teams and expertise on servicing this segment. If you go to our larger-ticket lending, it is a commodity business. Also, larger-ticket borrowers tend to shop for pricing and the takeover of business is high in such loans. In the affordable housing space, you are minimising your loss of customers and you are also minimising your cost of borrowing.
What new product categories are you looking at?
We want to get into supply chain financing. We have started a team there and the team has done one disbursement. We are basically testing systems. The other category that we have started is unsecured small and medium-sized enterprise loans, which we refer to as business loans. Once these two stabilise, we will also get into personal loans for salaried individuals. But, we will do that gradually. Right now, personal loans that we have on our books are loans to existing customers who have completed one cycle with us. Here, the average ticket size is around Rs 55,000.
On salaried personal loans, we will probably look at a slightly larger ticket size of Rs 4-5 lakh. We will target salaried employees of select employers. Our people are in the process of building a database of companies. Employees of 750-1,000 companies will be eligible for these loans.
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With lenders ramping up personal loan disbursements, do you see the stress on the asset quality?
We are quite comfortable and bullish on the current portfolio that we are handling. If you look at our current portfolio of personal loans, it is largely dependent on our two-wheeler customer base. Around 70% of two-wheeler customers are self-employed or small businessmen. I do not see a stress there. But the salaried personal loan market could see some stress. That is why we are not looking at aggressively growing salaried personal loans. We are just plugging a gap in the portfolio. It will not be a huge portfolio that we will be building. We will be doing it very selectively.