Tag: Ravi Subramanian

‘Won’t need significant loan recast as market has improved’

Personal Finance

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Shriram Housing Finance MD & CEO Ravi Subramanian

For Shriram Housing Finance (SHFL), which has completed a decade of operations, the second quarter this fiscal promises to be one of the highest quarters ever in terms of disbursements, says its MD & CEO Ravi Subramanian. In an interview with Mithun Dasgupta, Subramanian says the company would not need “significant” loan restructuring going forward as the market has improved. Edited excerpts:

How is the demand for housing loans after the second Covid wave in comparison to the first one?

After the first Covid wave, a lot of pipeline transactions just went on hold from March to May. People who came into the market in June saw a huge uptake from July (2020) onwards. In the last financial year, the third and fourth quarters were very good for most housing loan players. We also did record numbers as our disbursal last year was 95% more than the previous year.

This fiscal, there was a slowdown in demands. The pick-up has not been of the same nature as last year. Nevertheless, in July (2021), the business was back to last year’s pick levels. Demand for housing has picked up. I just hope that it sustains.

What percentage of housing loan demands are coming from people who already own houses?

There is around 10-15% increase in the number of persons who are building additional rooms in their existing houses, which means that people are going in for expansion. We have also seen a lot of people, who already own a house, coming in to buy a slightly larger house and clearly expressing an intent that they would sell off the old house to meet the liabilities. That too was a 10-15% increase over the previous quarters. So, there is an increase, there is a definitive shift towards people going in for larger properties.

SHFL’s disbursements for Q1FY22 stood at Rs 221 crore, against Rs 77 crore for the same period of FY21. What will disbursements look like going forward?

Q1FY21 was a very slow quarter. April and May this year was a washout. In June, we were back to about 80% of our normal disbursal. In July, we were back to our last year’s numbers. So, we are very much back on track in June and July, which means that business has picked up significantly. My company has grown through Covid-19, in the sense that my numbers before Covid were not as high as there are now. Pre-Covid, one year was a period of investment for us.

We had started transforming the organization, started growing the book, started building the distributions. So, we were on the growth path when Covid hit us. Q2FY21 was the first time our company crossed `500 crore disbursal in a quarter. This year, in July we already clocked `225 crore disbursal, which was about 30% more than what we did in June. Thus, for the company, Q2FY22 promises to be one of the highest quarters ever, if I go by the July trajectory.

What are the factors that contributed to the growth in numbers?

We had transformed the organisation in terms of areas of focus, customers segments and the products that we wanted to launch sometime in Q4FY19. After that, we have been investing in our teams and focusing on six states in south and west, and building our books. We aspire to hit about `400-500 crore in about 24 months, which we will. Today, we are one of the largest housing finance players in terms of growth in disbursal, assets under management, profitability and the portfolio quality of the new book. The portfolio quality of the new book is roughly about 77% of our total book, which is the best in class (in affordable housing loan) today. We believe in slow and steady growth.

What was the number of loans the company restructured in the first quarter?

In Q1FY22, we restructured around Rs 72 crore of loans. In the previous quarter, we had restructured loans of Rs 58 crore. Total, we have restructured roughly 3% of our book, out of which about 1.4% was in current up to 30 days when we restructured. So, it is not that we only restructured delinquent customers and higher bucket customers, but also genuine customers who had been paying and were going through some stress.

Collections in our restructured book are also very good. In fact, in July, on the new book, roughly 99% of our customers paid one EMI at least. I don’t think that we will be restructuring anything significant going forward because the market has improved.

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Growth agenda back on the table: Ravi Subramanian, MD and CEO of Shriram Housing

Banking & Finance

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The demand for housing is back after the second Covid wave and overall tailwinds are positive, believes Ravi Subramanian, Managing Director and CEO, Shriram Housing Finance. In an interview with BusinessLine, he said the company is looking at faster growth after the performance in June. Housing finance companies should be allowed to charge prepayment penalty in initial years, he further said. Edited excerpts:

How is the demand for housing post the second Covid wave?

Demand is back. In June, we did 80 per cent of our regular disbursals. Collections were back on track and we collected from almost 99 per cent of the customers we had originated in the last three years. It has improved further in July. The cheque bounce rates have reduced and in July were the lowest in the last 12 months. People are now reconciled to Covid, business is getting back on track. If we get another two months, business will be back roaring across the country.

Which are the segments where there is demand?

We are seeing a lot of demand in Tier 2 and Tier 3 towns. People are expanding their houses. Self-construction is giving us good volumes. Smaller and affordable housing projects are seeing a fair bit of traction. There is a lot of demand in the Rs 20 lakh to Rs 25 lakh segment, and the higher end of the spectrum, which is absolute ultra luxury. Our NPAs are well under control. NPAs had deteriorated by about 20 basis points in April, May and June. But given that our collections have picked up and bounce rates have come down, I expect September to be a far better quarter.

What kind of growth are you targeting?

Last year, the Covid impact stayed till the end of the first quarter. We started disbursing at the end of July and early August. Despite that, we grew our disbursals by about 90 per cent last year. This year, disbursals have started in June. If I get a clear runway from now on till the end of the year without a third wave, then disbursals could increase by at least 60 per cent to 70 per cent. Last year, we did about Rs 2,100 crore and this year we will do at least Rs 3,000 crore provided we get a clear runway from now till March. We will end up with assets under management of about Rs 5,500 crore to Rs 5,700 crore. June has brought the growth agenda back on the table.

How do you perceive competition from banks that offer low interest rates?

HFCs should be allowed to charge a prepayment penalty in case the customer moves in the first two-and-a-half to three years. The low interest rates are not much of an issue. There are many critera and not many customers meet it. It is a headline rate. My attrition last year for balance transfers was 9.5 per cent. We have a fairly aggressive retention process where every customer who wants a foreclosure letter is spoken to, their needs are assessed and we try and retain the customer.

How much restructuring have you done?

We did Rs 58 crore of restructuring in the first round on a Rs 4,000 crore AUM. About Rs 26 crore to Rs 27 crore were from customers who were current and not delinquent. In round two, we did a similar number of Rs 58 crore to Rs 60 crore of restructuring. So my total restructuring is about about 2.6 per cent of my total book.

Are you looking at any acquisitions?

We were interested in an HFC buyout earlier this year but the target company pulled out at the last stage. We will be happy to look at acquisition opportunities for an HFC with an AUM of over Rs 1,500 crore. If we don’t get a good acquisition opportunity, we will build it.

What is your strategy for expansion?

We are looking at faster growth now. Last year, we opened 26 branches of Shriram Housing co-located with Shriram City Union Finance in Andhra Pradhesh and Telangana. This year, we had initially planned to get to 100 branches from 26 branches this year. But after our experience in June, we have decided to fast-track it to all branches of Shriram City Union Finance in the two states by September.

Have you become more careful in underwriting customers?

Caution can never be wished away in the lending business. We do not want to do large value loans. We will do restricted LTV. We will not do new to credit customers. There was a time when our new to credit customers were 25 per cent to 30 per cent. Now, it is at about eight per cent to nine per cent. About 80 per cent of our customers have a credit score of more than 700.

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