In a strategic move to reinforce its position in the competitive landscape, Shriram Finance Ltd. (SFL) has plotted a course centred on modest-sized lending and a burgeoning used vehicle market. Steering away from overarching topline growth, Executive Vice Chairman Umesh G. Revankar shared that the firm is intent on boosting its bottom line, enriching it with the cream of high-yielding assets during the ongoing financial year.
During a recent interaction, Mr. Revankar detailed SFL’s game plan to home in on their specialty: small ticket loans alongside a focus on the previously owned vehicle sector. “We will be focusing on our niche area of small ticket lending and used vehicle portfolio, where high-yielding assets will be given a little higher weightage,” he elaborated, signaling a tactical emphasis on profitability over mere revenue expansion.
In the fiscal year ending 2024, SFL has already showcased a robust financial performance, reporting a standalone net profit upsurge of 20% year-on-year, totaling a notable ₹7,190 crore. Furthermore, the company saw its total income swell by 17%, reaching ₹34,998 crore. These numbers underpin SFL’s assertion that a granular, bottom-line-forward approach can yield substantial financial rewards.
Mr. Revankar also offered insights into industry growth trajectories, suggesting a potential deceleration in the first quarter of FY25. According to him, the machinery of government being enmeshed in electoral processes during April and May might induce a lull in public capital expenditure and infrastructure undertakings. It is a period where the market typically braces for moderated activity before regaining momentum.
However, looking beyond the short term, SFL is optimistic about demand dynamics as the second quarter of FY25 rolls in, especially with positive forecasts regarding the monsoon season from the Indian Meteorological Department (IMD). Drawn by the agrarian uptick expected in rural locales, the company envisions a robust demand recovery post the electoral season.
On the subject of financial guidance for the coming years, Mr. Revankar did not hold back on the company’s ambitious targets. “We are already at 16.4% and we should be able to cross 17%. By FY26, we will be at 18%,” he predicted regarding the anticipated return on equity, further cementing the confidence in their strategic direction. To complement this, he forecasted a healthy 15% growth in Assets Under Management for FY25.
SFL’s commitment to the second-hand vehicle space comes at a time when the market is witnessing a significant surge in demand. Rising new vehicle prices and a more value-conscious consumer base make this sector increasingly attractive. By honing in on previously owned automobiles, where margins tend to be higher, SFL is consciously leveraging market trends to optimize its financial profiling.
The pinpoint focus on small ticket loans is yet another illustration of the company’s deep understanding of the nuanced needs of its customer base. These loans cater to a segment of borrowers often under-served by traditional large-scale lenders. By offering tailor-made financial solutions, SFL aims to build a stronghold in this segment, aligning its portfolio for sustained growth and profitability.
As the world emerges from the shadows of economic uncertainties, SFL’s proactive and prudent financial focus appears aligned with the overarching industry direction. A granular approach to building the bottomline, underpinned by a commitment to niche markets and a clear-cut profitability strategy, demonstrates SFL’s vigilance and adaptability in a rapidly evolving financial ecosystem. With their sights set on striking that fine balance between growth and profitability, Shriram Finance Ltd. is geared up for a fiscal journey that promises to be as prudent as it is promising.
