Micro small and medium enterprises contribute significantly to Indias inclusivesocio-economic progress. The growth potential of this segment is immense considering thesize of the country; and its large proportion of young aspiring entrepreneurs. Howeverthe absence of organised financiers with strong domain knowledge and restrictivestandardised credit policy of banks (with overemphasis on statutory certified information)is hindering the growth of the MSME finance space.
Providing the growth capital to this segment is therefore an attractive opportunity forus at Shriram City Union Finance (Shriram City). We have the domain knowledge and ourlending model is based on our long-standing relationships with customers. We are largelyinspired by a sense of community; and we are committed to handhold small entrepreneurswho have a proven track record of performance. Our business is also aligned to theGovernments Make in India initiative which aims to encourage moreentrepreneurs to compete across Indias vast markets as well as the global level.
At Shriram City we are tapping into the vast potential of the small enterprisesfinance space; providing growth capital to entrepreneurs who find it difficult to dealwith unscrupulous money lenders on the one hand; and highly organised banks on the other.We are leveraging our existing customer base as well as those of the Shriram Group as awhole.
FY 2015-16 was another successful year at Shriram City. Niche focus on the smallenterprises finance space and considerable presence in the two wheeler segment have stoodus in good stead.
Our Assets Under Management (AUM) grew by 17% from Rs.16717 Crores in 2014-15 toRs.19576 Crores in 2015-16 on account of proactive marketing initiatives and customerconnect programmes. Our total income grew by 10% from Rs.3482 Crores in 2014-15 toRs.3835 Crores in 2015-16.
Our profit before tax declined marginally by 4% from Rs.841 crore in 2014-15 to Rs.807Crores in 2015-16. At the same time our net profit decreased by 5% from Rs.558 Crores in2014-15 to Rs.530 Crores in 2015-16.
Migrating to the RBIs more stringent non-performing asset (NPA) recognition normshas impacted our profitability. We had to make an additional provision (inclusive ofincome de-recognition) of Rs.177 Crores in 2015-16 following the regulatorsdirective to shift from a 180 day to a 150 day norm for NPA recognition. The RBI in 2014tightened the NPA recognition norms for NBFCs to bring them on par with banks. Wefollowed a 180 day norm (loans where borrowers have defaulted in their payments for 180days or more were classified as NPAs). Now we will have to comply with the 90 day norm byMarch 2018.This will impact our earnings in two ways. One will be the reversal in interestincome on migrating to the 90 day norm and two the increase in provisioning on accountof incremental NPAs.
In FY 2015-16 we moved to the 150 day norm which has translated into escalating NPAs.From 3.01% in FY 2014-15 gross NPAs have touched 5.15% in FY 2015-16 on a 150 daycut off (3.6% under 180 days). Earnings have declined by 5% in FY 2015-16 vis--vis theprevious year.
Enterprise finance remains our key product; and it comprises 54% of our disbursementsin FY 2015-16. We have built competencies to assess demand gaps in this domain; and arewell positioned to cater to the demand with our focus on Tier II and Tier III towns.
Rising middle class aspirations growing per capita income and easy financing optionsare driving our two wheeler four wheeler and Gold loan products. We are also takingadvantage of emerging opportunities to grow our retail finance presence.
Our housing finance subsidiary with focus on the affordable home loan segment isgrowing at a steady pace. The Governments Real Estate (Regulation and Development)Act 2016 is a major step to protect the interests of home buyers; and will bolster theconfidence of home buyers and market players in the home loans segment. Our loan book grewby 73% in FY 2015-16 owing to growing scale and scope.
We are consolidating our leadership positions in enterprise finance and two wheelerfinance. We are also strengthening our position and operations in the western and southernparts of India. At the same time we are foraying into new markets across the eastern andnorthern parts of India.
We are entering new markets after evaluation of local market dynamics onground credit assessment and establishment of strong recovery mechanism. We haveleveraged our technology capabilities to facilitate faster and convenient processescreate best-in-class technology platforms and reduce transaction costs. We havecapitalised on the emerging transformational trends of mobility digitisation and rapidgrowth of social media to create value for our customers. In line with the constantlychanging digital landscape we are enhancing our robust technology platform to ensurecustomer satisfaction; and move in step with Digital India.
We have a diverse workforce comprising professionals from different geographies withvarying educational and socio-economic profiles. We train our people for relevant skillsand instil a culture of high performance along with transparency and ethical businesspractices.
At Shriram City social responsibility forms an important part of our businessphilosophy. During the year we conducted various community development initiatives inline with our credo of holistic growth.
We will continue to deliver on our stakeholder expectations while working passionatelyto enable enterprising India.