Shriram City Union Finance, a deposit-accepting NBFC and part of the over Rs 1-lakh-crore Shriram Group, has done well in the third quarter of FY21 as it doubled its disbursements quarter-on-quarter. In an interview with Sajan C Kumar, YS Chakravarti, MD & CEO, says the company is planning to enter the loan against property segment in Q4. Excerpts:
How did the company perform in Q3?
We have doubled our disbursements in the December quarter on a QoQ basis, from Rs 3,000 crore to Rs 6,000 crore. If you look at the YoY figure, we also surpassed the Q3FY20 figure of Rs 5,822 crore. Out of Rs 6,000 crore, we have done about Rs 2,000 crore of two-wheeler loans. In the SME sector, we have done close to Rs 1,000 crore and the rest of the disbursements went into verticals such as used vehicles and gold loans. The demand for two-wheeler loans in Q3 came from across the country, except South as Dussehra and Diwali are not big-sales season there. Robust demand came from rural and semi urban areas. Increased awareness about the pandemic and people’s aspiration for owning personal vehicles also triggered the demand for two-wheeler loans.
What was your collection efficiency in Q3? What kind of loan restructuring are you anticipating?
In December, we touched the pre-Covid level, and November was also okay. Overall, for the third quarter, I would say the collection efficiency was close to the pre-Covid levels. We normally do 96-97%. I am in fact surprised with the resilience of customers; honestly I did not expect them to bounce back so strongly. What is heartening that it is sustaining. It is much better than what we have anticipated. On the asset quality, as of now, we have not seen much of a demand for restructuring. Less than 1% of the portfolio has come up for restructuring. The businesses which have come up for restructuring are typically from the hospitality sector and those who are involved in the tourism sector.
Do you think the disbursement momentum is sustainable, going forward?
I think disbursements are sustainable, both in the two-wheeler and SME segments. On the two-wheeler side, demand will be there as the economy opens up further. Majority of the two-wheeler loans, about 70%, normally goes to the self-employed and small business segments. Most importantly, the company caters to rural and semi-urban areas. On the SMEs front, customers are approaching for working capital needs. Most of our SME loan customers are involved in trading and services and their activities have bounced back strongly. We anticipate a robust demand for working capital requirement from these two lines of businesses.
What is your expectation on the disbursement growth by the end of FY 21?
Disbursements during the last two quarters (second and third) were around Rs 9,000 crore. The first quarter was a complete washout. So, we will seal the current fiscal with Rs 16,000-crore disbursements. Normally, we do about Rs 6,000-crore disbursements every quarter, taking the total yearly disbursements to Rs 24,000 crore. However, the de-growth in AUM that we had seen in the first half of FY21 will be reversed starting Q3, and we may end the year with a slight positive growth. If everything goes well, we would be looking at achieving 12-15% AUM growth in the next fiscal.
Any new product in the offing?
We have been getting a lot of enquiries about the loan against property (LAP) segment since the last one year. As we are seeing demand, we did a pilot and found that it will be one category we would like to enter. We will unveil the product in the fourth quarter of FY21.