Shriram City Union Finance is India’s leading Non-Banking Financial Company in which it provides specialized services in retail & Micro Small & Medium Enterprise (MSME) lending. Shriram City Union Finance Ltd., a shadow lender backed by Apax Partners, is turning vigilant on its most important set of customers as the coronavirus pandemic roils businesses.
In a quarter affected by the Covid-19 pandemic, there was only a relatively slower decline in Assets under Management (lower by 6% annually and 2% sequentially). The Two Wheeler loan book grew 10% higher year-on-year. Standalone Net Profit, although lower by 24% year-on-year was up 26% sequentially. Operating Expenses were substantially reduced (lower by 18% annually and 20% sequentially), and accordingly, Operating Profit was higher 10% Q-o-Q. Asset quality continued to improve, with Gross Stage 3 levels at 7.28%. Loan impairments and write-offs were steady at last quarter’s levels.
Subsidiary Shriram Housing Finance Ltd., despite considerably lower disbursements in the quarter, registered a growth of 23% in Assets under Management over last year. Shriram Housing also registered, at 2.3% GS3, its best asset quality in the last five years.
Loans to small businesses including grain merchants, which make up a little over half of the company’s borrowers, jumped 99% to Rs 20 crore in the June quarter from a year ago. While there’s a demand for small-ticket loans, the financier prefers to wait for more clarity on their recovery, according to Chief Executive Officer Yalam mati Srinivasa Chakravarti.
Shadow lenders in India provide last-mile credit to businesses such as mom-and-pop(Kirana stores) stores, small restaurants, and individuals who need to purchase a new refrigerator or car. The bulk of Shriram City’s customers look up loans of less than Rs 15 lakh each and are probably among the most vulnerable in an economy forecast to shrink for the first time in decades.
The government’s massive stimulus package announced in May was aimed at helping small businesses, as Prime Minister Narendra Modi prepared to restart the economy. Earlier this month, the Reserve Bank of India allowed financiers to restructure certain loans by granting extensions of as long as two years with or without a freeze on repayments.
Chakravarti said he is against recasting loans as the practice leads to problems down the road. He predicts people will resume borrowing to buy scooters and motorbikes to aid mobility as states across India lift lockdowns.
The Chennai-based firm’s shares have lost almost half their value over the past year, compared with an average 18% decline for its 21 peers tracked by Bloomberg.
