Shriram Group gets RBI approval to enter asset reconstruction business | Company News

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

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

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

The group is already in talks with a number of partners regarding its planned entry into asset management. Another source said the ARC business would be entered in the current financial year.

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

“After monsoon, construction work will start. We may see a lot of activity from September end. The second half should be good naturally because of that. The budget was positive and that should also help,” Revankar said about credit demand.

“I was worried that the elections would cause a lot of disruption. Since the elections were slow, it did not disrupt a particular geographical area for a very long time. It did not have any negative impact on daily life. Therefore, the demand for loans was good. I expect the same trend in demand to continue,” he added.

In June, the Shriram Finance board had 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. The company 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. Asked about the status of the deal, Revankar added that SFL is awaiting RBI approval for the transaction. The transaction is expected to receive 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 for about three years since the merger in December 2022. “We wanted to complete all the integration activities within three years. The backend integration is 100 percent complete. We have been able to reach more customers with multiple products and the service has improved. It has definitely improved the net result. It will probably improve even more. One of the goals was to get a higher rating, which we are working on and we can see some positive changes in this fiscal year,” he added.

First published: July 28, 2024 | 16:56 IST