Will look at IPO when we touch Rs 50,000 cr of AUM: Manish Shah, MD & CEO, Godrej Capital

Manish Shah, MD and CEO, Godrej Capital

Manish Shah, Managing director and chief executive officer of Godrej Capital, said being part of a big conglomerate gives the company an edge in a crowded space.

His near-term aspiration is to further diversify Godrej Capital's loan book and to incubate the affordable housing business.

Just the fact that we got into a crowded space with a plenty of large names was a big deal, to begin with.

Our first goal was to build a strong foundation. This meant having the team, building the whole stack from a tech to digital-asset perspective and getting to a minimum scale of Rs 10,000 crore  of assets.

We were gunning for that internally. We have Rs 10,500 crore of AUM (assets under management) now. We have a near-to-zero NPA (non-performing assets). Whether you look at it from a team perspective or physical presence or from the stack stability of the platform or book quality, I’d say the foundation is good.

We have always been a wholly owned subsidiary of Godrej Industries. Nothing changes.

By the end of phase-1, which is by April 2028, we want to clock Rs 50,000 crore of loans. That is our first target. That would be a reasonable threshold to look at our public listing. For now, the group is committed to infusing the capital that we need by this year, which is around Rs 3,000 crore. After this infusion, we won’t need lot more capital.

Unlikely at this point.

Just being part of this group, having access to capital and borrowings give us the right to exist. The right to compete comes from the strength of the brand's access to capital, both equity and debt, the quality of the team and the technology platform we create. A lot of the right to win or USP is coming from the product-design side. We are among the few players from whom products can be bought digitally without applications physically coming to us.

We ended FY24 with about Rs 10,500 crore of loan book, roughly half and half in the housing business and NBFC business. On the housing side, we do only mortgages. On the NBFC side, our focus is on small business lending. A bulk of it is secured, and now, we have launched unsecured loans . Going forward, the split will be closer to 40 percent housing and 60 percent small business loans. We look to finish FY25 at Rs 17,000 - 18,000 crore of loan book.

Relatively speaking, we are still coming off a low base when you compare it to other market participants. Therefore, the growth rates would be higher. When we launched five years ago, we started in four cities and progressively moved. Now, we have 60 offices in 40 cities. We hope to be in over 100 locations in the next two years.

Through the COVID phase, housing margins, especially for quality ones, were extremely thin. The industry was lending at about 8.5 - 9 percent when the repo was 4 percent. That spreads have come down. We think that the prices would be slightly higher because it is a low-risk asset. However, it doesn't fully represent even the cost of acquiring the customer.

On the MSME slab, you're right that there's a wider range of pricing available. For example, for us, although the rate of interest starts from about 11 percent and goes up to 14 percent, I think it is a better representation of risk-based pricing than in the prime assets. For example, the medium- and high-income housing segment often reflects liquidity-based pricing rather than risk-based pricing.

To answer your question, we do get better pricing and that is why we are tweaking the mix 40-60 in favour of SMEs.

What we have done is to stabilise the book and grow what we have each year. We incubate one new business every year. A year before last, we did the preparation for MSME loans and launched it this year. We are doing the prep for affordable housing this year and we will go to market in the fourth quarter of FY25 or Q1 of FY26.

The plan is still underway. In 5 - 6 years, we would like to build an AUM of Rs 5,000 crore. In our housing business, for instance, the average ticket is about Rs 60 - 70 lakh. We operate mostly in the Rs 30 lakh - 1 crore range, as far as loans are concerned. The under-Rs 30 lakh segment is called affordable housing. We're open to looking at inorganic growth but that's not how we are leading with this.