Shriram Union Fin expects 30% loan volume growth in FY13

With 36% of its earnings coming from gold loans, Subhasri Sriram, Executive Director of Shriram City Union Finance does not expect the same rate of growth in gold loans this year. According to Sriram, gold loan was never a primary product for the company and therefore, it was never advertised. However, the popularity of these loans increased due to the sale of other products like business loans, she tells in an interview on CNBC-TV18.

Sriram further added that there was no pressure on the asset quality and they are looking forward to good collections in the present quarter. The company is also looking at 30% upward loan volume targets for this fiscal. Below is the edited transcript of the interview on CNBC-TV18. Also watch the accompanying video. Q: How is business looking at this point in time? You had 36% of money coming in from gold loans, is that under threat now after whole host of rules coming in from RBI?
A: Not entirely. Probably we will not have the same growth rate which we saw in gold loan last year, which was in line with the industry. I don't see that continuing this year but, definitely it is going to be way above the other products. Q: Is there the same drive with which you are pushing gold, after all we have seen the price taper off. The run away rally we saw in gold prices last year is not there this year. Is the security with which you go and give gold loans somewhat reduced, are you pushing it as a product?
A: Even in the last three years, we never pushed the product as a prime product for us. It has been more an effect of our selling other products. It is a fact that Shriram City Union has never advertised for gold loan or never marketed gold loan.
It invariably comes in as the effect of selling other products like business loans, predominantly. We don’t see gold loan being in any challenge but, we continue to get other businesses coming in. Q: What has been the status of cost of funds, because last quarter due to securitisation they declined, has it declined further in this quarter?
A: No, earlier the incremental funds have been more or less in line with the previous quarter. Obviously the cost of funds might not be very high but, it will be certainly more than the previous quarter. Q: What is the difference between cost of funds and what you make on them? Is it comparable to last quarter?
A: Invariably, it is close to about 8-9%. Q: What is the kind of loan volume you will do?
A: This year we expect, at least in terms of balance sheet growth, close to about 30% upward volume growth. Q: Does the equity capital support this kind of growth or will you be looking for any kind of equity issuance?
A: Capital will not be immediately required for two reasons; one, the capital had been coming in and we have the warrants of an issue which we made in March last year. It is going to coming in during this year and the next 18 months. We also have a lot of headroom on our tier two capital. I do not think we will require capital immediately in the next 12 months. Q: You have been focusing a lot on the SME side and the smaller borrowers. How does that place you on the asset quality side? Have you seen any kind of pressure? Is it better than the larger borrowers? How is the asset quality situation looking like right now?
A: Undoubtedly, the quality of asset is better than large corporate because they are not part of the stress currently seen in the large corporate. Our business is not even medium scaled, it is more a part of the small and micro small industries. So they are more or less supporting the local consumption, local markets and which today is largely unaffected.
It's only the large corporates which are feeling the stress today due to the economic scenario. I do not see any significant stress on the asset quality and this quarter also we have seen good collections.