Shriram Finance Forecasts Steady Growth Amidst Economic Shifts

In a recent interview, Umesh Revankar, the Executive Vice Chairman of Shriram Finance, one of India’s leading non-banking finance companies (NBFCs), shared insights into the company’s growth expectations and strategies for the fiscal year 2025. The financial giant anticipates its assets under management (AUM) to register a robust growth of 20% for the current fiscal year ending March 31, and a slightly tempered but steady 15% growth in the subsequent fiscal year.

Revankar attributed the buoyant growth projection for the ongoing fiscal year to a strong performance in the first three quarters. However, he acknowledged the potential impact of upcoming elections in the first quarter of the next fiscal year, expressing caution about the diversion of economic activities and a potential slowdown during that period.

Shriram Finance, formed through the merger of Shriram Capital, Shriram City Union Finance, and Shriram Transport Finance in November 2022, stands as a significant player in India’s NBFC sector. As of end-December, its AUM had already exhibited a notable 20.7% year-on-year growth, reaching 2.14 trillion rupees. Revankar highlighted the successful synergy resulting from the merger, emphasizing the increased contribution from medium and small enterprises (MSMEs), gold, and passenger vehicles to the company’s portfolio, which has positively impacted its yield.

Maintaining a favorable trajectory, Shriram Finance aims to sustain margins in the 8.9%-9% range for the current quarter. This resilience is attributed to a well-structured loan portfolio and is reflected in the company’s net interest margin (NIM), which stood at 8.99% in the December quarter, up from 8.52% in the same period the previous year.

Addressing the possibility of issuing dollar bonds in the next financial year, Revankar noted the positive response from investors to Shriram Finance’s recent $750-million bond issue. The move aligns with the company’s strategic approach to capitalize on market conditions and investor sentiment.

Shriram Finance has navigated regulatory changes effectively, with Revankar noting that the Reserve Bank of India’s mandate for lenders to allocate more capital for personal loans and credit cards has had a limited impact on the company. This is attributed to Shriram Finance’s focused lending strategy, catering primarily to existing customers and avoiding exposure to new-to-credit customers.

Looking ahead, Revankar outlined the NBFC’s goal to maintain its share of the personal loan portfolio below 5% of its total AUM. As of the fiscal third quarter, this share stood at 4.45%. Additionally, Shriram Finance continues to explore options for providing growth capital to its housing finance arm, Shriram Housing Finance, underscoring its commitment to strategic expansion and diversification.

In conclusion, Shriram Finance’s proactive approach, robust performance, and strategic initiatives position it for sustained growth in a dynamic economic landscape. The company’s ability to navigate challenges and leverage opportunities underscores its resilience and adaptability in the evolving financial sector.