Shriram Housing Finance, which operates in the affordable home loan segment, is targeting a growth of more than 50% in FY22, says MD & CEO Ravi Subramanian. Edited excerpts:
How will the housing finance sector benefit from the Union BudgetтАЩs provisions?
The government continues to be focussed on its agenda of тАШHousing for AllтАЩ. This Budget announced the extension of PMAY (Pradhan Mantri Awas Yojana) benefits. The emphasis on this segment is clear with the affordable housing rental programmes. ItтАЩs good to see that there is a clear plan for ensuring benefits to the last consumer.
There are also some changes at the sector level which are worth mentioning. One good change is that AIFs are now permitted to buy NPAs. This was earlier restricted to only ARCs. With AIFs entering this space, it brings in some competition. This is likely to expand the market.
From a pure housing market perspective, a lot of things have changed over the last 3-5 months and demand for small and medium ticket houses is coming back. Also, work from home has pushed the demand in mini-metros, even in metros people are upgrading their homes. We expect this demand to continue in the new year as well.
What is the growth you are expecting?
If you look at our home loan book, we are looking at a growth of around 50-60% next year. Our numbers this year, despite the three months of COVID, will be about 60% more than last year. So effectively, we would double our volumes in FY22 when compared to FY20. We are in a strong growth trajectory, and we have made adequate arrangements, both financially and operationally, to manage this growth efficiently.
Where do you stand vis-a-vis larger peers?
We operate in the affordable housing finance segment. Our AUM is тВ╣3,500 crore and we have grown by about roughly 50% CAGR over the last two years. We have identified 6 States as our core markets, where we would build significantly deep-rooted distribution networks.
Apart from this, we would continue to have operations in major cities of another 3-4 States. Our focus is to have a well-entrenched network across the South and West.
In the Southern states of Tamil Nadu, Andhra Pradesh, Telangana and Karnataka, we focus on affordable housing. Shriram Group has a large customer base across various loans products. Shriram is a very strong brand in these States and we co-exist with other businesses of the group.
A significant part of our customer base has existing relationship within the group, and to that extent is credit tested within our network.
In the Western region which is largely Maharashtra, Gujarat and Rajasthan, we focus on the mid-income segment. Over here, our focus is to build and grow the Shriram brand.
Our core segment continues to be self-employed customers where we use internal credit tools to assess the customer and extend credit accordingly.
Overall, we operate in a diversified geo-segment for sourcing loans. And since we are working across segments spanning from affordable to the low-to-mid income category, we are able to maintain an average ticket size of тВ╣15 lakh.
What has been the impact of COVID-19 on your company? Are any NPAs likely to build up?
As at quarter ended December 2020, despite COVID, our stage III assets have increased by merely 10 basis points. Our portfolio has performed very well. Provisioning has gone up marginally in line with our stage III assets and the focus has been on efficient collections. Our engagement and customer awareness programmes during the lockdown phase have helped in our collection activities.
In January 2019, we brought in a new way of doing business which included new credit appraisal processes. The same has resulted in us having nil NPA in our тВ╣2,000-crore plus business sourced since January 2019.
In 2019, you set new parameters and standards. How has that helped?
We were earlier operating through our 88 branches across the country which we reduced to 55 with more manageable and smaller, focussed geographies because we were keen to bring in efficiency of scale in these markets. This minor restraint helped us increase our domination in the targeted markets.
Secondly, we brought in a management team, which will actually take the business from here to тВ╣10,000-15,000 crore. Our new team is capable of scaling our current business to 5X or 6X of the size.
Further, we have moved a lot of our customer service to the digital model. We have launched an app which assists the customer with any information he may need on his loan, including downloading essential documents or making EMI payment.
So, our endeavour is also to move our services to the digital platform and educate the customer on this. Our digital and technologically enabled customer acquisition and underwriting has helped us immensely.
What is your overall growth plan?
Shriram Housing Finance is a focus area for the group. We will end this year at тВ╣3,700 crore, which is roughly 60% more than last yearтАЩs AUM. Our growth plan on the AUM side is to get to тВ╣6,000 crore next year and тВ╣10,000 crore the year after.
We intend to grow from 70-plus branches to around 175 branches by March 2022. We would continue to enhance our distribution in our focussed markets.
We will go deeper in the States and dominate the States of the South тАФ Karnataka, Andhra Pradesh, Telangana and Tamil Nadu, and also the States of Maharashtra, Rajasthan and Gujarat.
In the coming couple of quarters, we may see infusion of growth capital in the range of тВ╣300-400 crore in SHFL. Our present net worth is about тВ╣600 crore, and in another two quarters we will reach an optimal leverage level.
So, we will be raising capital in the near future and it is likely to be from the parent.
