Shriram Group lowers growth guidance for merged finance biz in FY23

To slash excess liquidity from a 6-month to 3-month level

Turning cautious on the pace of expanding loan book, Shriram Group has scaled down growth estimates for the business of non-banking finance companies, under the merged entity, from 15 per cent to 12 per cent in FY23.

The growth rate (Year-on-Year basis) may come down when lending rates increase, and the credit demand may also come down to some extent. The growth for the combined entity (post the merger) may be about 12 per cent from earlier guidance of 15 per cent for FY23, said Umesh Revankar, Vice Chairman & Managing Director, Shriram Transport Finance Company (STFC).

"This is coming more out of caution. Presently demand in the system is good, but I do not know what it will be a few months later. Before Diwali, the demand goes up and post Diwali, it will be clear whether the demand is sustainable", Revankar said.

BSE-listed Shriram City Union Finance Ltd and Shriram Capital Ltd are slated to merge with STFC. The merger is to be completed in October 2022.

STFC's assets under management (AUM) grew by 9.55 per cent YoY to Rs 1.30 trillion at the end of June 2022 from Rs 1.19 trillion a year ago. Shriram City Union posted a 20.6 per cent YoY growth in AUM at Rs 0.40 trillion at the end of June 2022.

Revankar said the growth in AUMs in the last three years (Fy19, 20 and 21) was subdued (below 10 per cent YoY) due to the liquidity challenge for finance firms and the Covid-19 pandemic.

As for resources on the book, STFC would also reduce the excess liquidity on books by paying off maturing debt and deploying funds into lending activity.

Revankar said liquidity would start getting used as credit demand is strong. Also, there are certain maturities (of bonds) happening. It would be brought down to a three-month level from a six-month level. This will be done over three-four quarters.

At the end of June 2022, STFC was carrying excess liquidity of Rs 18,000, and the maturities for the next three months are Rs 8,000 crore. This liquidity was good enough to meet the maturities for the next six months. There is a lumpy liability, foreign currency liability of dollar bonds, which is in October, which is the prime reason for carrying excess liquidity.