According to reports from The Economic Times, Shriram Finance CEO Parag Sharma expects the company to sustain 18-20% credit growth annually and maintain 8.5% margins without requiring fresh capital for the next five years. The company, India's second-biggest non-bank lender by market value, has achieved this position after receiving a ₹40,000 crore investment from MUFG. As reported by The Economic Times, Sharma stated that earlier growth of 12-15% annually required capital infusions every two-three years, but the current position eliminates these concerns.
As reported by The Economic Times, Sharma emphasized that Shriram Finance will continue focusing on retail customers rather than large corporates, maintaining its expertise in retail, rural India and semi-urban markets. The company's comfort lies in used commercial vehicles, targeting new-to-credit customers and aspiring drivers. According to the report, Sharma confirmed that no shift towards large corporate lending is planned, with the business book remaining largely unchanged despite the capital infusion.
According to The Economic Times, Sharma outlined several new initiatives under consideration, including electric vehicle leasing models for large operators with two-three year contracts. The company is also exploring short-term financing for supply chain, logistics operators and warehouses, though it will only finance warehouses and not own them. Additionally, farm equipment financing, especially used tractors and equipment, is being evaluated, with repayment structures designed around crop cycles rather than monthly payments.
As reported by The Economic Times, Shriram Finance's incremental cost of funds has declined by 60-70 basis points following MUFG's investment and rating upgrade. The company's net interest margin (NIM) of 9.04% is expected to remain at current levels for the next two quarters, with the steady-state NIM targeting 8.5%. The ₹40,000 crore investment income provides an additional NIM benefit of 0.5-0.6 percentage point, while overall liability costs are expected to decline by about 100 basis points over the next 2-2.5 years.
According to The Economic Times, Sharma noted that lower cost of funds now enables consideration of newer commercial vehicles where rates are around 10-11% compared to 16% for used vehicles. The company's used commercial vehicle financing remains its comfort zone, targeting risky segments that other lenders avoid. With nearly 80% of liabilities being fixed-rate and maturing over the next 2-2.5 years, the company expects gradual improvement in its funding cost structure as existing facilities are replaced. Sharma also revealed plans to raise $300 million to $500 million in overseas loans between January and March, leveraging rating-linked repricing clauses that helped secure cost savings on the $1.3-billion syndicated loan.
