Shriram Finance Seeks Strategic Partner for Future Growth
The Chennai-based group is looking for a strategic partner to fuel its growth in the auto-focused non-bank lending space
Shriram FinanceStrategic PartnerAuto Focused Non Bank LenderGold Loan BusinessStable MarginsReal Estate MumbaiMay 27, 2024
The vice chairman, Umesh Govind Revankar, stated that they are looking for a strategic/financial partner for Shriram Finance, with a huge growth opportunity in their business. However, they have not started negotiations with anyone yet and have not disclosed a timeline for the same.
Revankar ruled out private equity players as their preferred choice, citing that PEs invest in listed companies, and their holding company Shriram Capital is privately held. He added that PEs demand higher stakes, but they will not go down below 25%. Therefore, a non-PE player would be a better fit for them.
It can be noted that Piramal Enterprises had invested in three Shriram businesses in 2011 but exited the stake through block deals in June 2023. Piramal also had a 20% stake in Shriram Investment Holdings, which the Chennai group is now trying to buy back.
On the reason for Piramal's exit, Revankar said that since there was no non-compete clause in the investment agreement, once they entered the financial sector on their own, it made better commercial sense.
Revankar expects loan growth to come in at least 15% and maintain stable margins at 9%. This optimism is based on the cost of funds marginally coming down from the second half, as he sees a rate cut in the third quarter. The auto sector exposure is as high as 82% for the company, but Revankar is comfortable with the current asset mix.
The company is planning to open 150 more branches this fiscal and wants to grow its gold loan book, which is only 2.8% or R6,300 crore as of end-March. They will raise at least R30,000 crore of additional capital from the market and through banks to fuel the 15% loan growth.
Shriram Finance is a leading non-bank lender in India, with a strong presence in the auto-focused lending space. The company has a diverse portfolio of commercial vehicles, two & four-wheelers, gold loans, and small business loans.
Shriram Group is a Chennai-based conglomerate with interests in general and life insurance businesses, wealth management, and real estate, apart from its flagship Shriram Finance. The group was founded by industry veterans Ramamurthy Thyagarajan, AVS Raja, and T Jayaraman in 1974.
Frequently Asked Questions
What is Shriram Finance looking for?
Shriram Finance is looking for a strategic/financial partner to fuel its growth in the auto-focused non-bank lending space
Why is Shriram Finance not keen on private equity players?
Shriram Finance is not keen on private equity players because they invest in listed companies and the holding company Shriram Capital is privately held Also PEs demand higher stakes but they will not go down below 25%
What is Shriram Finance's expected loan growth?
Shriram Finance expects loan growth to come in at least 15% and maintain stable margins at 9%
What is Shriram Finance's plan for its gold loan business?
Shriram Finance wants to grow its gold loan book which is only 2 8% or R6 300 crore as of end-March They will offer gold loans in 500 more branches this fiscal
How will Shriram Finance raise capital for its growth plans?
Shriram Finance will raise at least R30 000 crore of additional capital from the market and through banks to fuel its 15% loan growth
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