Shriram Capital to restructure lending to refocus on other businesses: Umesh Revankar, Executive VC, Shriram Finance

Umesh Revankar

Upbeat on the prospects of strong 20% growth, a rating upgrade and lower cost of funds, Umesh Revankar, executive vice chairman, Shriram Finance, says MUFG Bank is the long term partner which will bring stability and help the lender plan for the long term.

With the MUFG Bank deal done, Shriram Capital, promoter of the vehicle lending major is likely to restructure it’s credit and lending business. Revankar explains that the move is more to ensure that the parent entity can refocus on other businesses. In this interview to Moneycontrol post the deal, Revankar also laid down why the company issued strong denials when media reported on the transaction.

Edited excerpts:

Most of our peers also have high capital adequacy. So it is not that we only will have. We need the capital for long term, because we can't be going to the market very often.

Say 5-10 years, because capital buffer gives the comfort of a long term vision and plan, which we need not keep changing every time I need to raise capital. This capital raise was as part of a way of doing business for us. We wanted a partner, and it had to be big enough. I can't raise funds through a QIP. That's the reason we felt that we need to look for a long term or a partner who can be with us for very long. We went for a big cheque, so that it gives me some kind of a solution for maybe 5-10 years.

We expect the return on assets to increase from 2.8 percent to 3.5 percent, with the fund raise. Since the leverage will come down, return on equity will reduce in the near term. It will return as we leverage more, and we utilize the capital. But if you look at it from a market perspective, market will always appreciate the company which have a strong balance. With the strong balance sheet, if I'm able to attract liability at lower cost, that is a big thumbs up, as I would be  able to service my customer at a better price. What is now happening every year is that I lose certain customers, either competitor or to the bank, because I'm not able to service them in terms of pricing. That can stop.

This financial year, this financial year, we targeted Rs 3 lakh crore of AUM. We are almost, almost there. I think with a 20 percent CAGR we should get there.

Definitely, we have no plan on housing. I don't intend to restart housing portfolio in any way.

Even otherwise we would have done it, to refocus our energy on the business activities. We believe our credit business require a different kind of attention and the other businesses where we have a strong partner, it also need a certain focus. I think only to bring focus into the activity we may be restructuring the credit business.

No, it's not. Shriram Capital will remain promoter in the board and there is no change in our strategy. Credit or lending is going to remain our main flagship company.

You asked me if Shriram Finance will re-enter the housing finance business after the non compete ends. We don’t want to have that kind of discussions ever come up with the Shriram Ownership Trust (SOT). That’s why the non-compete fee. SOT will not have a parallel business coming up after this deal.

Yes.

Our conversation with rating agencies has been there for quite a long time after the mergers of Shriram Transport and Shriram City Union. This stronger balance sheet will give a strong case for an upgrade.

If you look at the refusal, the headline was that the promoter is selling the stake. We are not selling stake. Therefore we denied it.

I need to relook into what we have done, but what message to stock exchange is that it is not a stock sales and MUFG will be a long term partner.

I think we they are happy with our business and they'll continue the way it is today.