Shriram Group gets RBI nod to venture into asset reconstruction biz

The conglomerate announced last year it would enter ARC and wealth management businesses

Chennai-based conglomerate Shriram Group is set to enter the asset reconstruction (ARC) business during the current financial year and has received approval from the Reserve Bank of India (RBI), a top company executive told Business Standard.

The group announced in November last year that it was planning to enter the ARC and wealth management businesses. The wealth management business will come under Shriram Credit, a subsidiary of Shriram Capital, while the asset reconstruction will be managed by Shriram Capital.

“We have received in-principle approval from the Reserve Bank of India (RBI) for the ARC business. We are working on it. Both ARC and wealth management are group initiatives,” said Umesh Revankar, executive vice-chairman of Shriram Finance.

For the planned entry into wealth management, the group is already in talks with multiple partners. Another source said the foray into the ARC business would happen during the current financial year.

On the other hand, Shriram Finance (SFL), the largest retail non-banking financial company in India, has said that there is unlikely to be a revision in its guidance of 15 per cent growth for the current financial year regarding its assets under management (AUM). By the end of the first quarter, the NBFC’s total AUM increased by 21 per cent to Rs 2,33,443.63 crore compared to Rs 1,93,214.67 crore during the same period in 2023-24.

"Post-monsoon, construction activities will start. Maybe from the end of September, we can see a lot of activities. The second half should be naturally good because of that. The Budget was positive and it should also help,” Revankar said about credit demand.

“I was fearing that elections would create a lot of disturbances. Since the election was slow, it did not disturb a particular geography for a very long time. It did not have any negative impact on day-to-day life. Therefore, the credit demand was good. I expect the same demand trend to continue,” he added.

In June, the Board of Shriram Finance approved the sale of its housing-finance subsidiary Shriram Housing Finance (SHFL) to Warburg Pincus for Rs 4,630 crore to focus more on its core operations and secure growth capital. It has a pan-India presence with 155 branches and an AUM of Rs 13,762 crore and a net worth of Rs 1,924 crore as of March 2024. When asked about the status of the deal, Revankar added that SFL is awaiting the RBI clearance for the deal. The deal is expected to get regulatory approval by the end of the third quarter of the current financial year. SFL will receive Rs 3,900 crore from the sale.

The company has been around three years since its merger in December 2022. “We were looking to complete the total integration activities in three years. Back office integration is 100 per cent complete. We were able to reach out to more customers with multiple products and service has improved. It has definitely improved the bottom line. It is likely to improve further. One of the goals was to get upgraded in the rating, which we are working for and may see some positive development this financial year,” he added.