As Shriram Group merger nears completion, 500 branches of STFC, SCUF to cross-sell products: MD

The merger between Shriram Group of companies will likely be completed by September-end, and to increase the effectiveness of merged entity, over 500 branches of Shriram Transport Finance Corp (STFC) and Shriram City Union Finance (SCUF) will cross-sell each other’s loans, deposits and other products beginning July 1, SCUF Managing Director and Chief Executive Officer (MD & CEO) YS Chakravarti told Moneycontrol on June 22.

Shriram Group's board had on December 13 approved the merger of its lending subsidiaries Shriram Capital (SCL) and SCUF with STFC. The merged entity would be known as Shriram Finance.

Chakravarti said the group ran a pilot project, focusing on cross-selling different products of STFC and SCUF in 50 branches initially. This led to loan lead generation of up to Rs 40 crore in the first 45 days of launch.

“We are comfortable with the numbers achieved so far. From July 1 onwards, we will expand the pilot project to a minimum of 500 branches so by the time NCLT (National Company Law Tribunal) approval is achieved (for merger)…our internal platform should be integrated, and branches should be also ready to sell all the products,” Chakravarti said.

Within two months, the 500 branches are likely to generate leads of up to Rs 400 crore of loans, he added.

Merger updates

Shriram Group companies have till now received approvals from the Reserve Bank of India (RBI) and Securities and Exchange Board of India (SEBI) for the merger. Approvals from insurance regulator IRDAI and competition watching CCI are still pending and should not face any issue, the MD said.

“Approvals from IRDAI and CCI are pending and should not face any issue…post shareholder votes and counting of votes, it will take us anywhere between six to eight weeks before NCLT gives us go ahead for the merger,” Chakravarti said.

“September is what we are targeting for (the merger to be completed with STFC), in case of any delay it could be over by October,” he added.

Fund raises

STFC on June 9 announced securing long-term funding of $250 million from US based International Development Finance Corporation (DFC). The 10-year, external commercial borrowing (ECB) loan, was raised at a fixed-rate of approximately 4.50 per cent, the MD said.

End use of these funds would be towards extending loans for small commercial vehicle (cv), small automatic battery charged goods carrying vehicles, light commercial vehicles, harvesters and tractors, Chakravarti said.

“We have an approval from RBI to raise $500 million internationally in FY23. Thus, depending on lending requirements and market conditions we will evaluate and raise the additional money,” the official added.

“If the demand for credit picks up, we can also get additional funding approval, over and above the $500 million. STFC's lending profile falls entirely under priority sector lending and proceeds will be used for the same,” he added.

During FY23, on a combined entity level, the loan growth should be in 15 percent plus range, higher than 9 percent in previous fiscal, Chakravarti said. As on March 31, Shriram Transport Finance’s total assets under management (AUM) stood at Rs 1.27 lakh crore as against Rs 1.17 lakh crore a year ago.

Apart from merger, the Shriram Group is parallelly working on creating a super app that will soon offer loan, deposit, mutual funds, insurance, and payment services, Chakravarti said.

The group will also launch a supply chain financing product by July-end and come up with a personal loan product for prime customers by end of current financial year.

“We have earmarked Rs 200 crore for us to understand the product (supply chain finance)…so we will evaluate the performance at Rs 200 crore of loans and basis our experience scale it up,” Chakravarti said.