Shriram Finance To Join The League Of Top Retail NBFCs Post Consolidation
Shriram Group's consolidated lending company will focus on offering a wider set of products to its customers.
The Shriram Group's corporate restructuring plan will create one of India's largest retail financing non-banking finance companies. This, as all of the group's lending businesses will be consolidated under Shriram Transport Finance, likely to be rechristened as Shriram Finance Ltd. The new entity will also hold 44.56% stake in Shriram Automall and 85.02% in Shriram Housing Finance.
The combined entity will start with assets under management of Rs 1.5 lakh crore, according to a presentation released by Shriram Group. It will have a branch network of 2,796. Combined capital adequacy is estimated at 23.8%, while gross non-performing asset ratio will be at 6.9%.
Umesh Revankar, managing director of Shriram Transport Finance, will be appointed as the vice chairman of Shriram Finance, while YS Chakravarti, who leads Shriram City Union, will become the managing director and chief executive officer of the merged entity. Similarly, Parag Sharma, joint managing director and chief financial officer of Shriram Transport Finance, will be appointed as whole-time director and CFO.
Presently, the lending businesses operate in silos, with lending products from one group company not available at branches of the other. The restructuring exercise will aid in addressing this gap, said DV Ravi, managing director of Shriram Capital.
Already, according to the group's presentation, seven out of every 10 Shriram Transport borrowers and five out of every 10 Shriram City Union borrowers have availed other financial products from the Shriram ecosystem.
The consolidated financial services arm will offer a wide suite of retail products ranging from gold loans to vehicle finance, small business loans to housing finance.
"We're looking at the customer base to see how to best address their needs, not only on the lending side of things, but also any other financial services they may need.
While we can provide loans and deposits through Shriram Finance, other services like insurance, mutual fund, wealth management we can do on a fee-based model.DV Ravi, Managing Director, Shriram Capital
Once the restructuring is concluded, cross-selling opportunities will add about 10% incremental growth to the bottomline over two years, said Umesh Revankar, managing director of Shriram Transport Finance.
Shriram Group is expecting to get all necessary regulatory and shareholder approvals within 9-10 months, after which the consolidation exercise will take place. While it has not reached out to the major shareholders across various companies, the group is confident that the proposed merger will get necessary approvals in time, Ravi said.
Other financial services businesses such as the insurance, asset management, wealth management, financial distribution, will be demerged into a separate entity.
When asked whether the Shriram Group's insurance ventures were being considered for a stake sale, Ravi said the two insurance entities are well capitalised and the group does not intend to divest its stake in them immediately.