Shriram Fin to double down on expansion and diversification

Non-banking financing giant, Shriram Finance Ltd (SFL) looks to cash in on the retail loan boom in the country,  aiming for an annual average revenue growth rate of over 15%, says YS Chakravarti, Managing Director and CEO, SFL.

"Indian economy is expanding rapidly. The situation is driving up demand for credit, which is reflected in the 100% growth of India’s lending market between FY17 and FY21 to reach ₹156.9 lakh crore," he says.

SFL targets organic expansion in its existing segments and calculated diversification into new sectors that align with its core competencies. "NBFCs are well-positioned for growth opportunities in several business areas, including microfinance, consumer finance, affordable housing finance, MSME finance, and agricultural finance, particularly in rural and semi-urban regions," Chakravarti says.

Nuvama Wealth Management recently predicted that SFL might enter Nifty50 in March 2024, possibly replacing UPL. This change could bring $217 million inflow to Shriram, it says. The official list for the Nifty 50 rejig will be announced in late February 2024.

Chakravarti says that NBFCs played a crucial role in transforming India's lending space over the past decade. “These financial institutions have been instrumental in extending credit to individuals and businesses often overlooked by traditional banks due to weaker credit histories or remote locations. Notably, NBFCs have fostered innovation by introducing tailored lending products like microfinance loans and gold loans, which have made accessing credit easier and more affordable,” he says. Reserve Bank of India (RBI) has recently cautioned banks against unsecured loans to NBFCs.

NBFCs introduced a diverse array of loan products tailored to specific needs, offering personal loans, vehicle finance, SME loans, and housing loans, among others, he says. “Retail credit has especially taken off in the last five-odd years. Retail lending on the back of small ticket loans, contributes to total lending in India with commercial lending contributing an equal proportion. Microfinance makes up the balance. MSME loans have seen a growth of 13% in originations by value between FY17 to FY20,” he says.

NBFCs have been pivotal in supporting the informal sector and rural development by providing faster credit to entities with pressing financial needs, such as farmers and rural entrepreneurs, he adds.

SFL posted a 12.6% increase in net profit to ₹1,751 crore in the September quarter on the back of growth in net interest income and improving asset quality. The net interest income rose 17% to ₹4,818 crore. Assets under management (AUM) were up 20% and stood at ₹2.03 lakh crore as of September.