INSIDE THE PLAYBOOK OF A NEW SHRIRAM

Nine months ago, Shriram Finance Ltd was born. Shriram Capital, Shriram Transport Finance Company and Shriram City Union Finance merged, creating one of the largest domestic non-bank financiers. Today, it is the No. 2 in the pecking order of such financiers, behind Bajaj Finance, when it comes to assets under management. While Shriram Finance has bulked up since the merger, it is not gunning for the top slot. Not yet.

- Shayan Ghosh

Strange? Not really.

The pre-merger group companies were not known as aggressive lenders. And as a merged entity, Shriram Finance wants to grow at a pace it can sustain.

“We would like to remain profitable, instead of claiming the top position," said YS Chakravarti, the managing director and chief executive officer of Shriram Finance.

Chakravarti knows the organization, and its culture, all too well.

The genesis of today’s Shriram group lies in a company founded by R. Thyagarajan, his friend AVS Raja, and brother-in-law T Jayaraman. The trio set up Shriram Chits, a chit funds company, in 1974. Chakravarti began as a trainee at a Shriram Chits branch in Andhra Pradesh, in June 1991, working his way up over the next three decades. As the head of the ₹1.9 trillion non-banking financial company (NBFC) today, he has a tricky job at hand.

Shriram Finance wants to diversify the business, beyond its stronghold of financing pre-owned commercial and passenger vehicles—a legacy of what used to be the group’s flagship business, Shriram Transport Finance. Prior to the merger, Shriram City Union lent to small businesses, financed two-and four-wheelers, gave loans against gold and personal loans. Shriram Capital was the holding company.

While overseeing this diversification, Chakravarti also has to retain long-term customers while not letting go of the organization’s ethos to lend to the underbanked. Unlike other NBFCs, Shriram largely lends to small business owners. In fact, a majority of the lender’s gold and two-wheeler loans are to small businessmen and the self-employed. But this is a double-edged sword. Bad loans are higher in this customer cohort. Improving the asset quality is an imperative.