We'll be able to grow the business much faster in the next 5 years: Umesh Revankar of Shriram Finance

The $4.4 billion investment by Japan’s MUFG Bank in Shriram Finance Ltd for a 20% stake will help the non-banking finance company (NBFC) expand and plan better for the future, but it will continue to focus on its core business of transport and SME finance. In an interview to BT, Umesh Revankar, Executive Vice Chairman, Shriram Finance Ltd (SFL), says with a strong balance sheet and capital buffer, its cost of borrowing will come down and credit upgrade will happen, and the balance sheet liability cost will come down by around 100 basis point. Edited excerpts:

What does the MUFG deal mean for you in terms of your expansion plans and your future business outlook?

This transaction puts the company in a very comfortable situation where I can plan for the long term without really knowing what will happen to my capital or capital adequacy or the cost of funds. It addresses most of the challenges what we have. I strongly believe that with the strong balance sheet and capital buffer, our cost of borrowing will reduce, and credit upgrade will happen, and my balance sheet liability cost will come down by around 100 basis point. That gives me a comfortable business plan where I can retain my customers who, for the sake of a better rate, move to other companies or other banks, and also it helps me attract customers of other companies and banks who were earlier in Shriram but then left. Since we have a track record of 50 years and know most business people, especially the in the constituency where we are, we will be able to grow the business much faster for the next five years. SFL is the second largest NBFC in terms of assets under management, offers several products including

What are your plans in terms of physical expansion and customer acquisition after this deal?

Basically, it improves our ability to respond to the customer and even customise products based on their requirement. When your cost of funds is a challenge, you are not able to really respond. Now I have all the advantages and can respond to the customer quickly and even offer them products in advance. This is the comfort and freedom we now get.

Will you continue to concentrate on your core lending activity or expand to other products or segments?

That we need to really see, I would prefer to remain in the ecosystem of the current business we are in - transportation and SME business. Within this ecosystem, if any new product can be launched, any new services can be offered, then we can give that. We should be doing what we know well. We believe we are the financial partner to the customer and when you are a financial partner, you should know the business as well as the customer.

Will you consider applying for a banking license and converting to a bank in the future or do you prefer you know the freedom you get in your current structures as an NBFC?

I don't really see there is a big advantage of becoming a bank. It is better to be where you know the environment. We don't have any such plans to know convert ourselves into bank. We have not discussed this with our partner MUFG. None of our discussions over one year have centred around a bank.

How is the credit demand in both vehicle and SME finance right now?

Rural demand seems to be quite good. There is feedback saying that urban demand has slowed in December even though it was very good in October and November. But I am yet to get the numbers for this. But rural demand seems to continue without much change.