Shriram Finance Eyes Revival in Gold Loan Segment and Expansion in Supply Chain and Irrigation Lending
Shriram Finance expects a resurgence in its gold loan segment by November, following regulatory adjustments. The company’s Managing Director and CEO, YS Chakravarti, noted a strategic focus on conservative growth targets for asset under management (AUM) and steady net interest margins (NIM). Chakravarti discussed key priorities, including expansion in supply chain and irrigation loans, as well as a continued commitment to green financing.
Conservative Growth Approach in AUM and NIM
Chakravarti projected an AUM growth rate between 15-18% for the current fiscal year, emphasizing that Shriram Finance is not aggressively targeting 20-25% growth. He underscored a conservative approach to AUM, along with stable NIMs, which are expected to remain largely unchanged, within a margin of three to four basis points.
Gold Loan Segment Anticipates Recovery by November
Shriram Finance is cautiously optimistic about a recovery in its gold loan portfolio by November. Disbursement slowdowns in both the gold and personal loan sectors have been influenced by regulatory tightening, impacting the company’s loan-to-value (LTV) strategy. Adjustments to LTV policies now restrict gold loan offerings to 60-62%, below the previous 75%. Chakravarti remains confident that once regulatory inspections are complete, normal disbursements will resume.
Personal Loan Portfolio Strategy Amid Sector Stress
While personal loan growth has slowed, Chakravarti attributes the primary stress to salaried-class borrowers using loans for discretionary spending. In contrast, Shriram Finance’s portfolio primarily consists of loans to existing two-wheeler customers, many of whom are self-employed or small business owners. This focus, he says, has helped mitigate exposure to higher-risk segments.
Stake Sale in Shriram Housing Finance to Boost Capital Adequacy
Shriram Finance, along with partner Valiant Partners, recently initiated a share purchase agreement to divest their stake in Shriram Housing Finance. Chakravarti explained that continual AUM growth in the housing segment demands capital infusion every two years, a commitment which led the company to reallocate resources to the parent entity, enhancing capital adequacy by 80 basis points.
Plans to Expand Green Financing and New Verticals
Shriram Finance is also preparing to introduce dedicated supply chain and irrigation loan portfolios, with a strong focus on green financing. A new internal vertical now supports financing options for environmentally sustainable projects.
