“We should be definitely able to use this opportunity of good environment and grow much faster and also improve our bottom line and other factors like the asset quality, etc,” says Umesh Revankar, Executive VC, Shriram Finance.

The economy is growing, monsoons are going to be better, interest rates and inflation, everything is under control. So, is Shriram Finance, is the company in for a bumper year?
Umesh Revankar: Yes, fundamentally, if you ask me with the good monsoon, good uptick in the overall economic activity we are definitely in one of the good year. We should be definitely able to use this opportunity of good environment and grow much faster and also improve our bottom line and other factors like the asset quality, etc.

Let us understand the growth in comparison with what the underlying nominal growth is. GDP growth 8%, inflation 4% to 5%, that makes the nominal growth of about 12% to 13%. So, are you likely to grow at least 3% to 4% higher than the nominal growth?
Umesh Revankar: Yes, if you take GDP growth as 8%, definitely yes we should be able to grow more than 15%, that is very comfortable. So, it all depends, see, ultimately our business depends upon the economic activity and as there is more economic activity across urban and rural market, we should be able to grow more than 15% very comfortably.

Are you saying that this year itself, you are likely to beat your guidance because you started the year with the hope of around 15% kind of growth in AUM, but given the fact that rural recovery is expected to pick up pace and you did allude to the fact that in second half of the year you are expecting a further pickup in the CVs, likely to beat your own guidance?
Umesh Revankar: Yes, ultimately, we all like to grow faster than the guidance given because guidance will be normally calculated based on estimated GDP growth and on expected other infrastructure growth and today, when you look at the monsoon prediction, the upbeat in the rural market and urban market also with good anticipation of government spent on infrastructure and government focus on employment creation, we are definitely confident that our growth will be much better than what initial guidance is given.

I also wanted your view regarding the non-CV side of things because of course you were trying to diversify into MSME, gold loans, etc, as well, but with the latest kind of commentary that we have heard from the RBI, even a couple of other outlets have talked about a bit of a stress in the unsecured in the smaller end of the book, would that make you slow down your growth in the non-CV vertical or how are you looking at that portfolio?
Umesh Revankar: See, we need to understand, we need to split this unsecured loan into two. One is the loan given without knowing the application of money and the loan given for business activity with the knowledge of where the money is going to be spent.

RBI is more focused on the unsecured loan disbursement where the usage is unknown. But where the usage is known, where it is going for business, there RBI and government both have been encouraging.

So, this unsecured is not just between secured and unsecured. It is depending upon where the money is getting being used. So, for all the business activity, whatever the loan given, it goes into improvement of a business or for the right purposes.

So, these are all positive. And I feel we need not again and again look back at what RBI has told. RBI is very clear that money should be or loan should be given to the right purpose or application should be known, so I think we are very confident. Our entire business model is focused on giving the lending to the productive purpose. So, we are very confident that our businesses will keep growing and there is nothing to be worried about the speculative part of the loan or disbursement.

I just wanted to also touch upon the recent fundraise that you have undertaken, NCDs worth 150 crores, a green-shoe option of 750 crores. What will be the outlook in terms of the fund deployment down the line and are you looking at debt repayment as well?
Umesh Revankar: See, fundraising is part of the raw material for our lending activity. Raising resources is a raw material. It is a continuous activity, we will keep doing it. We need not actually prepay any payment, but normal repayment will continue to be repaid on time, so that is how it works. So, we are looking at multiple sources of resources, not to get dependent on one and we also are looking for the best rate, best cost that is possible for us to see that our net interest margins are kept intact.

And what about the outlook then when it comes to introducing non-CV products and I would actually get in a sense as to what the expectation is from the budget. Is there any sort of a wish list in particular when it comes to new projects, on the infrastructure side, what is it that you are working with?
Umesh Revankar: See, basically we are looking at three growth areas. One is MSME, passenger vehicle, and the gold loan. They are likely to grow more than 20% this year. Maybe including even two-wheeler demand also could be higher. So, these are all the segments which are likely to grow more than 20%, mainly because the infrastructure what we are creating to reach out to the larger public for MSME is working out and also in the gold.

Now we are creating all India reach through combined entity. So, therefore, we are able to grow faster. As far as passenger is concerned, the growth opportunity looks much brighter, mainly because if you observe in the last few years, the state undertaking have not been investing sufficiently enough in the public transportation, so that is giving much bigger scope and opportunity for the private entrepreneurs to enter into public transportation, so that is giving us a huge opportunity and that is where we are growing.

Coming to the budget expectation, we are very confident that government will keep focusing on the infrastructure because government wants the make in India more affordable and for that the logistics is very important.
The improvement of logistics are likely to give India a huge advantage in the international arena.

Therefore, the government will keep spending on the infrastructure part of it and that is one area and this time around government will also be focusing on rural infrastructure because that gives the rural market a better access to the urban market and therefore the realisation will be much better for the rural economy and therefore, I feel government will focus on the rural infrastructure also. So, both this put together I think will give us a better growth because rural market growing faster will give a better economy of scale for the rural manufacturing or the agri.

At the same time, the urban market or the industrial part of it, manufacturing part of it will get a better scope in the international market. So, both of them augurs well for us. And we expect that government will continue to focus on these two areas.

But the Street is fairly excited about what is going behind the scenes because we understand that the company has been meeting a lot of PE firms, a lot of global investors as well. You, of course, divested your stake in the housing finance arm and sold it to Warburg Pincus for almost 4,600 odd crores. What else is happening? What is the behind the scenes story right now? What are you focusing on?
Umesh Revankar: See, I did mention what is our focus area. We feel that lending to business enterprises, small entrepreneurs are the focus area for us and we will continue to focus on the same. And as I said in the beginning, we are trying to create a reach across India for all our products. Therefore, our ability to reach out to customers will become much better. As we become more accessible, we would be able to be more meaningful and see that the small entrepreneurs and rural entrepreneurs get benefit out of our services.