'There is a slowdown in the economy'

'I believe that the overall demand for commercial vehicles will improve, even though there is a slowdown in the GDP.'

Shriram Finance, one of the largest retail non-banking financial companies in the country, has seen its net profit go up by 73 per cent in the October-December quarter, owing to a one-time gain from the sale of Shriram Housing Finance.

The company's Executive Vice-Chairman, Umesh Revankar, talks to Shine Jacob/Business Standard about the roadmap after the deal, growth in the financial year 2025-2026 (FY26), and the third-quarter results in a telephonic interview.

What's next for you after the Shriram Housing deal? Will you be targeting becoming a bank in the future?

We did the deal because we wanted to focus on the core business. Our focus will remain on the core business of lending to small entrepreneurs.

If we have to do anything in the financial system, we have to focus on the roadmap given by the Reserve Bank of India (RBI).

The RBI should come out with the roadmap for NBFCs to become banks. Until then, we cannot even imagine this.

As and when the RBI comes out with a roadmap, we will relook at the way we do business and make the necessary changes.

Shriram Finance's gold loan assets under management (AUM) has declined. How are you looking at this business?

For a couple of quarters, we did go slow because it needed certain changes in the way we are doing business.

I believe in the next two quarters, we should keep growing.

We have revisited certain policies and adopted them immediately.

I believe that the gold loan portfolio will grow from now onwards.

In our case, most of the valuation of the gold is done in-house. We don't outsource it, and we also keep it in our office only.

Therefore, there is no significant change in the way we do business.

If you exclude the one-time gain, Q3 numbers were not that attractive. Why is it so?

If you look at the Gross Domestic Product (GDP) numbers, there is a slowdown in the economy.

However, that did not reflect in our AUM growth, and we did grow by around 19 percent.

The only thing is that net margins have come down a little from 8.74 per cent to 8.48 per cent because we are carrying higher liquidity in the balance sheet.

We were carrying this excess liquidity because we thought there could be some challenges in liquidity in the market due to changes in the United States environment, and that was more of a precautionary measure.

Overall, the cost of borrowing has moved up marginally, not significantly.

The margins are reasonably good enough, as we had given long-term guidance of a margin of 8.5 per cent.

Otherwise, the credit cost remained at the same level. Overall, it was a good quarter for us.

I believe that the overall demand for commercial vehicles will improve, even though there is a slowdown in the GDP. Since utilisation levels are still high, there is good demand.

Asset quality worsened across segments, including commercial vehicles, construction equipment, gold loans, and personal loans. Is it a cause for concern for you?

The gross and net stage III assets going up is very insignificant considering the market conditions.

These are all seasonal changes and not significant. We are in the fourth quarter, and going by the trend, situations are much better and stronger in the fourth quarter, as collections also improve.

What is your expectations from the Union budget?

We are quite comfortable in FY25, and everything is as per our expectations and plans.

Growth will be much better in FY26, as the capital expenditure by the government is expected to be much higher.

The AUM growth in FY26 will definitely depend on the GDP growth, and there is an expectation that GDP growth will remain robust at around 6.5 per cent to 6.7 per cent.

In that scenario, we should grow anywhere between 15 and 18 per cent.

We believe that infrastructure spending will be high during this budget, which will improve the demand for steel and cement.

That, in turn, will create demand for medium and heavy commercial vehicles (MHCV). Overall, it should be better.

Feature Presentation: Aslam Hunani/Rediff.com