Mar 04, 2010, 09.46 AM | Source: CNBC-TV18

Will apply for a banking licence, says Shriram Transport

In an interview with CNBC-TV18, R Shridhar, MD of Shriram Transport Finance Company Limited said the company is interested in applying for banking license.

R Shridhar, MD, Shriram Transport Finance
The Reserve Bank of India is considering allotting new banking licences to private-sector companies and non-banking finance companies. The step will help expand the reach of banking services to more areas, Pranab Mukherjee said while presenting the Union Budget in Parliament.

In an interview with CNBC-TV18, R Shridhar, MD of Shriram Transport Finance Company Limited said the company is interested in applying for banking license.

Below is the edited transcript of R Shridhar's exclusive interview on CNBC-TV18. Also watch the video.

Q: Confirm for us that you would go for a banking licence and what is the attraction beyond the fact that it gives a better profile and how much will promoters finally end up holding if they need to dilute or raise money to do thisif they go for a bank?

A: We as a group, we have been nurturing this ambition of having a bank for the past few years. We are excited and we welcome the announcement. We are excited at the prospect of having a bank in Shriram and looking at the reports in the newspapers, which are appearing in certain sections of media, I understand even though there are no details which have come subsequent to the announcement in the Budget but from the newspaper reports I feel that its not going to be one another bank.

The government is clearly expressing that they are looking at the banks licence to achieve the inclusive growth, the financial inclusion and serving the rural economy and all that.

Thats exactly Shriram has been doing for the past 30 years in all our businesses we have been serving the un-served customers. We feel that we are well positioned to look at this opportunity. That is the excitement for us.

Q: If you go back into Indias banking history, one of the reasons the central bank would have gone in for nationalisation and other things was they are in a version to having industrial houses owning banks or having an interest in running banks. Do you have an indication if the Reserve Bank will take the same approach saying, If you are coming from an industrial house then I am not going to give you a licence. But if you are coming from a pure financial background then I am ready to give you the license?

A: The industrial houses have not been getting licences in the past for various reasons but the financial houses have been getting it and they also feel large financial services companies like Shriram we have been there in non-banking financial banking companies (NBFC) and catering to niche segments and also we have two insurance companies.

We have retail stock broking so we are a retail power house so the logical conclusion for us is to look at the banking, which fulfils the whole gap so we are really looking at this opportunity.

Q: How do you think NBFCs will approach as and when these guidelines are in place? Would it be much simpler for them to buy an existing bank? Would that be the preferred route?

A: For an NBFC to either get converted is going to be a difficult proposition because the banking regulations and NBFC regulations are different particularly in terms of non-performing loans (NPL) recognitions and surveillance, the branch opening all that are very stiff for banks. But what I am talking about is from the groups point of view Shriram Group is big and we have a holding company Shriram Capital and that has a huge net worth so we have multiple opportunities from the NBFC point of view.

Q: I am asking how NBFCs would approach it. Will they want to go and apply for a banking licence or as and when the rules are in place and if they feel that they are eligible would buying be a better option. How would you approach it as a CEO?

A: We would look at applying for a fresh licence rather than buying existing bank and going it. We would prefer a fresh licence.

Q: How business is shaping up? We have seen fairly robust growth in commercial vehicle (CV) market itself. Give us an idea of how you may end the year in terms of a quarter-on-quarter growth, not year-on-year, because that tends to be robust for everyone? How is FY11 at least from this point of view shaping up in terms of the kind of earnings growth you can post?

A: We have been growing very well in the current year and after the global meltdown the growth has been quite good. We have been growing our assets around 25%. So thats continuing and with the commercial vehicle industry reviving and the interest rates are not moving up in a hurry. The performance of the company is going to be very good.

We are looking at reaching an assets under management of around Rs 30,000 crore by March 31 and we are looking at another 25% growth from that level in the FY11 and we are also put in place few fee income activity. So all these are going to increase our earnings substantially. We are very optimistic.

Shriram Trans stock price

On November 24, 2015, Shriram Transport Finance Corporation closed at Rs 846.10, up Rs 0.00, or 0.00 percent. The 52-week high of the share was Rs 1286.40 and the 52-week low was Rs 761.50.

The company's trailing 12-month (TTM) EPS was at Rs 56.79 per share as per the quarter ended September 2015. The stock's price-to-earnings (P/E) ratio was 14.9. The latest book value of the company is Rs 407.17 per share. At current value, the price-to-book value of the company is 2.08.

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