Shriram Housing gets ₹300-cr equity capital from parent firm

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Shriram Housing Finance Ltd (SHFL) on Wednesday said it has received the second round of equity capital infusion of ₹300 crore from parent company, Shriram City Union Finance (Shriram City).

With this round, the total equity infusion in FY22 stands at ₹500 crore, SHFL said in a statement.

The current infusion will increase Shriram City’s holding in SHFL from 81 per cent to 85.02 per cent. SHFL is an affordable housing finance company with Assets Under Management (AUM) of about ₹4,000 crore as of June 2021.

Referring to the affordable housing and mid-market segment witnessing strong demand in tier-2 and tier-3 cities, SHFL underscored that the capital infusion will be utilised to fund the rising demand for home loans.

The company plans to expand its distribution with primary focus on cross sell through the Shriram Group network to Shriram customers in Andhra Pradesh and Telengana. The capital will also be utilised to fund the expansion plans in the targeted regions, the statement said.

Ravi Subramanian, MD & CEO, SHFL, said: “Our parent’s capital infusion will help us expand our footprint and enhance our growth potential. This is also a reinforcement of the groups’ faith in our transformed business model.

“The market has seen latent demand for housing increase significantly, especially from the low income households where sources of employment remain largely informal.”

With the latest round of capital infusion, SHFL’s net worth, which was at ₹788 crore as of June 30, 2021, has risen to ₹1,088 crore.

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

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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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Shriram Housing Finance to provide free vaccination to customers, BFSI News, ET BFSI

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In an industry first, mortgage lender Shriram Housing Finance has decided to provide free vaccination to its 20,000 affordable housing customers. The company would roughly spend Rs 1000 per loan as vaccination cost and would cover two members in a family. It estimates to spend nearly Rs 2 crore to provide free vaccination to its customers.

The mortgage lender had earlier announced that it would bear the vaccination cost of its employees.

“Customers in the affordable housing space are not very well off and for them even the small sum to be incurred in vaccination through private players can become a big deterrent, this in turn can derail the vaccination drive,” said Ravi Subramanian, MD, Shriram Housing Finance. “We would be reaching out to all customers with details of this program.”

Several banks including State Bank of India, HDFC Bank, ICICI Bank, Axis Bank have said that they would bear the vaccination cost of employees.

State Bank of India has set up an internal task force to extend immediate assistance to its members.

A Quick Response Team (QRT) headed by a General Manager has been set up at Corporate Centre for monitoring the COVID position at the whole Bank level,” said Rana Ashutosh Kumar Singh, DMD (HR) & Corporate Development Officer, SBI. “Similar teams headed by Deputy General Managers have been set up in all 17 Circles for monitoring the COVID situation in their area and providing assistance to staff and their family members.”

HDFC Bank has converted its training centres in Pune, Bhubaneswar and Gurgaon into isolation centres to deal with Covid-19-related emergencies for employees with symptoms. The bank has also tied up with hotels across the country for rooms.

Some banks have started tying up with doctors who could guide employees in dealing with their Covid-19-related fears. About 1.5 million people are employed across Indian banks.



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