Expect robust growth in next 3 quarters: Shriram City Union

GS Sundararajan, MD Shriram City Union expects to see robust growth for the next three quarters given the impetus in micro, small and medium enterprises (MSME), two-wheeler and retail space.  

In an interview to CNBC-TV18 he said that the company's gold segment will continue to grow and it will be a significant part of its book going ahead.
The company posted a net profit rise of 13.54 percent at Rs 117 crore for the first quarter ended June 2013. Below is the verbatim transcript of GS Sundararajan's interview on CNBC-TV18 Q: Your net interest income (NII) grew reasonably at 17 percent, profit at 13 percent. How is the rest of the year looking? You have a decent capital coming in. Will you be in a better position to expand the margins in the next few quarters?
A: We will be sticking to our budget in terms of what we have planned for the year. The Q1 is always much lower in terms of growth as compared to the earlier year and also because we had reduced our gold book significantly from 38 percent of the portfolio to 24 percent.
There is a lot of impetus in the micro, small and medium enterprises (MSME) space as well as in the two-wheeler and retail space. Therefore, we expect growth to continue to be robust for the next three quarters as well. Q: How much capital did you get from the conversion of warrants?
A: Overall, we had Rs 320 crore of capital infusion. What came in as warrants is a smaller amount of about Rs 73 crore. But the overall preferential allotment that came in since last year is about Rs 340-350 crore. Q: Are you looking to lower your proportion of gold loans further?
A: Not really. Infact we will always be between 25-30 percent of our book on the gold book. We were at 38-40 percent and it is on the higher side therefore, we brought it down to 24 percent. We will continue to grow in gold because it is a great business to be in and we have a lot of customers who walk in on the retail side and it will be a significant part of the book going forward also.
_PAGEBREAK_ Q: Do you face any stress in your gold loan portfolio on account of significant decline in gold prices?
A: Our loan to value is quite conservative. We didn’t face any stress on the gold. Q: What do you mean by conservative?
A: We have never done more than 55-60 percent of loan to value and also unlike many monoliners in gold, we have never advertised for gold. Gold is one of the products we offer in our branches and people who walk in as and when they feel comfortable. There is very little direct marketing we do for the gold book. Q: The economy is slowing down; many banks are reporting very tepid NII growth, what is your guidance or expectation of how much the assets under management (AUM) will grow for the entire fiscal year?
A: We should grow at 14-15 percent and the growth will largely come from the MSME business and the two-wheeler and retail businesses. Q: Can you give us some idea as to how the banking licence will be approached by the group. Shriram Capital has applied for the licence. But what will be the position of Shriram City Union in that case since common businesses will have to go to the banking entity?
A: Shriram Capital has applied for the banking licence and having applied for the banking licence, the application, the detail of the application and the ball is in Reserve Bank of India’s court. I would definitely not like to discuss the details of the application till RBI comes out with the assessment. Q: Shriram got the RBI approval for hiking foreign institutional investors (FII) stake up to 74 percent. Have you received some interest from FIIs, are they likely to infuse some more money in the company?
A: We have got significant FII participation in Shriram Transport Finance Corporation as well as in Shriram City. This hike will only enable us to get in much more FIIs because we do have a lot of investors interest globally as we do road shows etc and we do expect this hike will enable us to bring in a lot more of the FIIs. Q: Will that happen in the next three or six months? How soon will it translate into any FII hiking stake?
A: Our capital adequacy is reasonably healthy, it’s on the higher side today and as we require capital we will go in for FII investments as well. Q: What is the current FII holding?
A: In Shriram City it’s about 54 percent.