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Shriram City Union Finance (SCUF), the NBFC arm of the Rs 60,000 crore Shriram Group, has set a target to grow its book size by around 20-25%. The projection comes at a time Piramal Enterprises, promoted by Ajay Piramal, proposed to infuse around Rs 790 crore in SCUF. On the backdrop of the infusion SCUF also said it can now take inorganic route to increase its book and expand its operations.
G S Sundararajan, managing director, Shriram City Union said "we had enough capital for two years and with this money (Piramal's infusion) for the next four years, to support our growth."
Last week Piramal Enterprises has agreed to acquire 658 million shares for cash on preferential basis at a price of Rs 1,200 per share of Shriram City Union Finance. This represents 9.99% of the post-diluted equity share capital, Shriram City Union. Estimated value of the transaction is around Rs 790 crore.
"We expect the money will come into the company, after getting shareholders approval, sometime in July" said Sundararajan, who added that Piramal will also have a board seat in Shriram City Union.
With this, in less than two weeks Piramal has committed around Rs 2,800 crore in Shriram Group. Late last month, Piramal Enterprises' agreed to infuse Rs 2,014 crore in Shriram Capital, holding company of all the financial services businesses of Shriram Group, followed by Rs 790 crore commitment in Shriram City Union.
With these, Piramal Enterprises, which has been focussing on corporate debt and equity financing for realty, infrastructure and education sectors, entered into the retail financial business.
Sundararajan says a few PE firms have shown interest to infuse money in Shriram City union, but company has been saying no to them. Industry sources attributed the interest from the PE firms on the backdrop of the returns the company has been giving to investors.
For example, last week Norwest Venture Partners (NVP) partially sold its stake in the company and clocked returns of over 4x.
Unlike PE firms, which comes a exit time and returns expectation, Piramal is coming as a strategic partner and will be a long term investor, with any exit time frame, says Sundararajan.
Piramal first expressed interest in SCUF, when it picked up stake in Shriram Transport last year.
"We can also now look at inorganic growth through, especially in the housing finance side," he said.
In August 2011, Shriram City Union forayed into the housing finance segment through Shriram Housing Finance Ltd, promoted by Shriram City Union.
The housing arm currently got a book size of around Rs 300 crore and the target is to double it in 2014-15. To meet the target capital requirement is around Rs 200-250 crore, which can be funded by the parent, says Sundararajan.
"Overall (Shriram City Union as a company) we can grow by around 20-25%," he adds.
The company closed 2013-14 with a book size of around Rs 14,800 crore as compared to Rs 15,600 crore.
"It (drop in the disbursement) was due to reduction in the gold book, due to our conscious decision on the gold portfolio."
Gold loan used to constitute around 4% of the total book, has come down to 18% and the company intends to take it to around 20-22%.
The company bets big on two wheelers and MSMEs segments.
"We have had a very healthy growth in both these segments year-on-year vis-a-vis last year. We expect around 28-30% from these portfolios," said Sundararajan.
