Edited Transcript of SHCU.NS earnings conference call or presentation 12-Jun-20 4:30am GMT

What we have done, I’ll just take 2 minutes on briefing you on what we have done. The moment the lockdown was announced, within 4 working days, our entire HO has swung out, and we had a BCP in place and the BCP was implemented. So within 4 days, the entire back office was operational. And what we have done is to — the biggest concern was that how do you occupy 28,000 people’s time during the lockdown. How do you actually make them occupied? So what we have done is all our sales — we have taken all our sales and collection teams as a unit. And for each of them, we have pumped in data of about 150 to 200 of our customers, including their mobile numbers, their account particulars, amount to be paid by them, what happens if they avail a moratorium, what is the extra interest burden that each of the customer has to pay and we have asked these teams to contact each and every single customer of the company. So to a large extent, we have succeeded in reaching out to the customers, explaining to them what is the impact of a moratorium and the long-term impact on the cash position — sorry, long-term impact on the tenures.

We have also equipped all these people, close to about 12,000 people with the ability to trigger an SMS to the customer with a payment link in case the customer wants to pay through a digital mode. The payment link gives various options for the customer to pay from various wallets, transfer through bank account, basically, ability to transfer money through a half a dozen different banks. So this link was sent. Each of the customer was reached and, as a result, in the month of April, where we typically have about INR 400 crores — we collect around INR 380 crores to INR 400 crores of cash in a month, so we were able to collect close to INR 250 crores from these customers through this digital mode. So we normal — we have — on an average per month, we get about 40,000 — 40,000 customers transact through the digital mode, which has jumped to close to 400,000 customers in the month of April. So that is basically the number I’m giving you because it shows how is the connect that SCUF has with the customers. Most of them were small customers paying anywhere from INR 4,000 to INR 10,000 of EMIs. So that’s how the collection and the sales teams swung out and were talking to the customers.

Now as I speak today, we have about — we have 900 of our 947 branches back in operation. Our corporate office and the team of senior executives have been attending offices from early May. A lot of collection team is also — customer-facing collection team is also — and sales team are also back in action physically. We are also — have put in a very, very effective work-from-home system for those people who are not able to attend the office who need to attend the office. And most of these branches are operating with between 25{09c3c849cf64d23af04bfef51e68a1f749678453f0f72e4bb3c75fcb14e04d49} to 30{09c3c849cf64d23af04bfef51e68a1f749678453f0f72e4bb3c75fcb14e04d49} of seating capacity. People who are in in sales and collection team who need not come to the office are advised to — not to come to the office, but continue the collection effort and remit the money directly into the bank. So rest is all in place, our accounts, finance, compliance, all this treasury, all this are in place, and they are running smoothly.

So among the measures that are initiated by RBI towards providing relief to the borrowers was on the moratorium and EMIs, and we have offered a moratorium to all our loan customers. And we have decided on the opt-out method. Despite having offered this moratorium, we managed a reason — reasonable collection efficiency in the month of April at 34{09c3c849cf64d23af04bfef51e68a1f749678453f0f72e4bb3c75fcb14e04d49} and in May at 52{09c3c849cf64d23af04bfef51e68a1f749678453f0f72e4bb3c75fcb14e04d49}.

We have also adapted well to the disrupted business environment caused by the lockdown. So as I said, we had this recovery team approach each of these customers, talk to them, explain to them and basically, most of the calls were to inquire about the well-being of the customer and if they are interested in payments, trigger the payment link and pay out.

So currently, as far as current situation is concerned, currently, we are seeing some movement in the economic activity with a direct connect to our operations. The April total shutdown, May second week onwards, people have started opening their businesses and started transacting. I’m glad to inform that in the month of May, we have disbursed about — we also started disbursements and we have disbursed around 50,000-plus 2-wheeler loans, which is amounting to something like around INR 270 crores of 2-wheeler loans and about another INR 220 crores of gold loans. And overall, about INR 500 crores plus of disbursement we were able to do in the month of May.

We also — what the going forward plan is, we’ll continue to disburse on the 2-wheeler and gold. We are pushing. We have not yet started the MSME loans, which we will start, hopefully, from July. We will focus on our existing customers and their needs first and then we will see whether we will — then we will go to the market.

The next priority would be the — also — we have also initiated our preowned 2-wheeler funding program. So it’s also what — one positive thing is, this lockdown has actually given us time to reach out to all our customers, talk to them. And in the month of May, the teams were busy in meeting customers physically, talking to them, finding out what is happening with their businesses and see the trends.

The trends I see is that most of the small businesses have opened their stores. They have started businesses. Some cash is flowing in. Some of the customers who opted for moratorium are paying 1 installment or part of the installment, whatever money they have left, they are able to spare, they are paying. One thing that we saw when we were talking — talked to a lot of customers in April was that they wanted to hold on to the cash because they didn’t know how long the lockdown is going to last. Even though they had money to pay the EMIs, they wanted to hold on to it. Some of the customers I have spoken to — personally spoken to more than 300 customers, the feedback that from most of the customers I got is they want — the assurance also that they gave me is that once the lockdown is lifted and they are back in business, they will start paying installment by installment. They do have cash. But they don’t want to pay now because, as I said, they are not clear when the lockdown will be lifted and when the business volumes will pick up. That was one of the feedbacks that I really got from our customers.

And to be very honest with you, it’s still — some of the businesses, they are still saying that though they have been open for about 20 days, they’re not seeing much of a footfall. These are like stores like clothing, a few jewelry stores that I have talked to in this month are saying the footfall is very low though they have opened the stores and kept it open. So they are hoping that it — I mean, they are hoping that in the next couple of months, volume should pick up, and they may be able to come to a 50{09c3c849cf64d23af04bfef51e68a1f749678453f0f72e4bb3c75fcb14e04d49}, 60{09c3c849cf64d23af04bfef51e68a1f749678453f0f72e4bb3c75fcb14e04d49} level is what the feedback that I have got from these customers.

So basically, wherever customers — the collection percentage — improvement of collection percentage from 34{09c3c849cf64d23af04bfef51e68a1f749678453f0f72e4bb3c75fcb14e04d49} to 52{09c3c849cf64d23af04bfef51e68a1f749678453f0f72e4bb3c75fcb14e04d49} in the month of May shows that most of our customers have opened businesses and are paying. In fact, June, if I look at June versus May as of today, the collections are almost close to 60{09c3c849cf64d23af04bfef51e68a1f749678453f0f72e4bb3c75fcb14e04d49} better than what it is in May. If this trend holds out, probably we should be ending up with a very good percentage in June, but early days. Because in the past 10 days, it’s mostly the 2-wheeler, the personal loans — the small ticket loans that are due — 15th is our due date for most of the customers. So we’ll have to see how it pans out post 15th.

I will also conclude my opening remarks now with an overview of the performance. Disbursement for the quarter was at — quarter 4 was at INR 5,416 crores. It was affected. Particularly some of the disbursement in the last week of May, we couldn’t do because that’s the time that normally you book a lot of business in the last week, in the month of March, and that got affected because of the lockdown, particularly in MSME loans. However, the overall disbursement grew 25{09c3c849cf64d23af04bfef51e68a1f749678453f0f72e4bb3c75fcb14e04d49} on a sequential basis. Our preowned 2-wheeler loans also performed well as a result, which — the disbursement in our auto loan segment. The preowned loans are — preowned 2-wheeler loans are clubbed with auto loans, which we will rectify, and for the next quarter, we will separate out the segment. They have grown by almost 140{09c3c849cf64d23af04bfef51e68a1f749678453f0f72e4bb3c75fcb14e04d49} year-on-year and 22{09c3c849cf64d23af04bfef51e68a1f749678453f0f72e4bb3c75fcb14e04d49} quarter-on-quarter. Overall disbursement in FY ’20 were, however, lower by 6{09c3c849cf64d23af04bfef51e68a1f749678453f0f72e4bb3c75fcb14e04d49}, mainly because of slower growth in MSME loans in the earlier part of the year and also a reduced focus on personal loans.

AUM growth was flat on account of the runoff rate being at the usual level and the disbursements being lower. Asset quality, however, improved substantially. GNPAs having reduced almost 100 bps and year-on-year and 60 bps quarter-on-quarter with PCR being maintained. Shriram City has put aside INR 426 crores in Q4 as a provisioning to accommodate the likely impact of COVID-19 and the consequent income reversal resulted in our top line being lower by about INR 31 crores. We maintained our risk, however, and NIM was steady in the 12{09c3c849cf64d23af04bfef51e68a1f749678453f0f72e4bb3c75fcb14e04d49} plus range.

Interest expenses were higher on account of enhanced borrowing and on account of keeping our liquidity — higher liquidity buffer, which actually indicates that liquidity is not — was not a major problem during the last part of the year. During the quarter, we raised INR 3,638 crores from a mix of privately placed NCDs, term loan, securitization under PCG as well as plain vanilla securitization and retail fixed deposits. Cost of funds too declined. Cost of funds were actually declined to 9.35{09c3c849cf64d23af04bfef51e68a1f749678453f0f72e4bb3c75fcb14e04d49} versus 9.71{09c3c849cf64d23af04bfef51e68a1f749678453f0f72e4bb3c75fcb14e04d49} in Q3 and 9.87{09c3c849cf64d23af04bfef51e68a1f749678453f0f72e4bb3c75fcb14e04d49} a year ago.

Then on our subsidiary — sorry, backup liquidity was comfortable as on 31st March at INR 2,200 crores. Our subsidiary, Shriram Housing Finance Limited, too performed highly credibly in a tough year, having grown their AUM 25{09c3c849cf64d23af04bfef51e68a1f749678453f0f72e4bb3c75fcb14e04d49} year-on-year to INR 2,304 crores, including a 10{09c3c849cf64d23af04bfef51e68a1f749678453f0f72e4bb3c75fcb14e04d49} quarter-on-quarter growth. Despite the lockdown affecting crucial business in March, Shriram Housing has clocked the highest-ever quarterly disbursement run rate of INR 400 crores. Asset quality was very good with GNPAs at 2.4{09c3c849cf64d23af04bfef51e68a1f749678453f0f72e4bb3c75fcb14e04d49}, being the lowest in 5 years. The company made a COVID-related provisioning of INR 10 crores. Cost of funds were stable sequentially. Reserve liquidity too was comfortable at around INR 1,270 crores.

With this, ladies and gentlemen, we open the floor for questions.

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Questions and Answers

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Operator [1]

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(Operator Instructions) The first question is from the line of Abhijit Tibrewal from ICICI Securities.

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Abhijit Tibrewal, ICICI Securities Limited, Research Division – Research Analyst [2]

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Thank you very much for very comprehensive opening remarks. So my first question is on your moratorium and collection efficiency. So if we heard you right, during your opening remarks, you suggested that you have a monthly collection run rate of about INR 380 crores to INR 400 crores.

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Yalamati Srinivasa Chakravarti, Shriram City Union Finance Limited – MD, CEO & Non-Independent Executive Director [3]

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Cash, that was cash collection.

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Abhijit Tibrewal, ICICI Securities Limited, Research Division – Research Analyst [4]

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Cash collection, right. And what would be the total quantum of the collections?

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Yalamati Srinivasa Chakravarti, Shriram City Union Finance Limited – MD, CEO & Non-Independent Executive Director [5]

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Sorry? Total collection for the month of April?

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Abhijit Tibrewal, ICICI Securities Limited, Research Division – Research Analyst [6]

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Sir, I mean, INR 380 crores to INR 400 crores is your monthly cash collection. What would be the total collections, including digital collections and cash collections?

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Yalamati Srinivasa Chakravarti, Shriram City Union Finance Limited – MD, CEO & Non-Independent Executive Director [7]

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You are talking about the demand for the month? Are you asking me the demand for month and the amount collected in that month?

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Abhijit Tibrewal, ICICI Securities Limited, Research Division – Research Analyst [8]

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Yes, sir. So in the month of April, what was the total billings? And what was collected?

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Yalamati Srinivasa Chakravarti, Shriram City Union Finance Limited – MD, CEO & Non-Independent Executive Director [9]

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Okay. Okay. Okay. Total collection was about — Chandru?

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Ramasubramanian Chandrasekar, Shriram City Union Finance Limited – CFO [10]

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Yes, I’ll take it. Collection in the month of April, we have the total amount to be INR 1,640 crores. But we collected INR 550 crores in the month of April.

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Yalamati Srinivasa Chakravarti, Shriram City Union Finance Limited – MD, CEO & Non-Independent Executive Director [11]

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INR 560 crores.

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Ramasubramanian Chandrasekar, Shriram City Union Finance Limited – CFO [12]

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So in the month of May, we have collectable INR 1,603 crores, we collected INR 685 crores, total around 43{09c3c849cf64d23af04bfef51e68a1f749678453f0f72e4bb3c75fcb14e04d49}. In the month of March, we collected 90{09c3c849cf64d23af04bfef51e68a1f749678453f0f72e4bb3c75fcb14e04d49}.

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Yalamati Srinivasa Chakravarti, Shriram City Union Finance Limited – MD, CEO & Non-Independent Executive Director [13]

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Let me add one more thing. In the month of May, around, the — around 600 — 16 — at INR 1,608 crores billing, we have collected INR 689 crores, which does not include mind gold — collection on gold. The collection on gold TBC is about close to something like INR 200-odd crores that we were able to collect everything on the gold in that month, in the month of May.

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Abhijit Tibrewal, ICICI Securities Limited, Research Division – Research Analyst [14]

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Okay. Okay. All right.

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Ramasubramanian Chandrasekar, Shriram City Union Finance Limited – CFO [15]

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If you take gold, 52{09c3c849cf64d23af04bfef51e68a1f749678453f0f72e4bb3c75fcb14e04d49} — INR 1,000 crores collected against INR 1,900 crores, 52{09c3c849cf64d23af04bfef51e68a1f749678453f0f72e4bb3c75fcb14e04d49} collection.

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Abhijit Tibrewal, ICICI Securities Limited, Research Division – Research Analyst [16]

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INR 1,952 crores?

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Ramasubramanian Chandrasekar, Shriram City Union Finance Limited – CFO [17]

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INR 1,900 crores. We collected INR 1,000 crores. So including all products, it’s 52{09c3c849cf64d23af04bfef51e68a1f749678453f0f72e4bb3c75fcb14e04d49}.

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Abhijit Tibrewal, ICICI Securities Limited, Research Division – Research Analyst [18]

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Okay. Okay. And sir, I mean, this was collection efficiency as on May. And during your opening remarks, you also suggested that collections in the month of June because you already had just one cycle on the 7th, you were suggesting it is 60{09c3c849cf64d23af04bfef51e68a1f749678453f0f72e4bb3c75fcb14e04d49} better than May? Or has the collection efficiency reached 60{09c3c849cf64d23af04bfef51e68a1f749678453f0f72e4bb3c75fcb14e04d49}?

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Yalamati Srinivasa Chakravarti, Shriram City Union Finance Limited – MD, CEO & Non-Independent Executive Director [19]

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No, no, no. I’m saying it’s 60{09c3c849cf64d23af04bfef51e68a1f749678453f0f72e4bb3c75fcb14e04d49} better than May, on a day-to-day comparison.

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Abhijit Tibrewal, ICICI Securities Limited, Research Division – Research Analyst [20]

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Right. Right. Right, sir. And…

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Yalamati Srinivasa Chakravarti, Shriram City Union Finance Limited – MD, CEO & Non-Independent Executive Director [21]

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12th May to 10th June.

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Abhijit Tibrewal, ICICI Securities Limited, Research Division – Research Analyst [22]

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Right. Right. And sir, I mean, something with regards to your liquidity. I mean, we understand that your liquidity position was, I mean, good as on March. But how have these months of April and May been like? What have you been able to raise incrementally in the months of April and May? Because if I understand correctly, given — if I look at your ALM profile, Chandru sir, did you have about INR 1,700 crores of payments due in April and May?

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Ramasubramanian Chandrasekar, Shriram City Union Finance Limited – CFO [23]

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Yes. Actually, the point — you’ll — I’ll take the answer now or you’re still — your question is hold or still…

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Abhijit Tibrewal, ICICI Securities Limited, Research Division – Research Analyst [24]

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Yes. So I’m done. I just wanted to understand what is the liquidity position right now. What we were able to raise in the months of April and May? And if we have about INR 1,700 crores of redemption.

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Yalamati Srinivasa Chakravarti, Shriram City Union Finance Limited – MD, CEO & Non-Independent Executive Director [25]

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It is not INR 1,700 crores. It’s INR 1,100 crores. Chandru, okay, go ahead. Chandru, please go ahead.

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Ramasubramanian Chandrasekar, Shriram City Union Finance Limited – CFO [26]

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Yes. With reference to liquidity, the point is, in the month of April and May, we have not raised any money. But in the month of June, last week, we have picked up some INR 350 crores of money. We have picked up INR 350 crores, one. And second thing is, we are quite comfortable with the liquidity. Still as of date, we have a very healthy balance. And the commitment is, if you see, very — if you include — the outflow includes fixed deposits and everything, so effectively, the large — commitment was INR 1,600 crores. But the balance — we have disbursed INR 500 crores as Chakravarti was telling in the opening remarks. Still, we are quite comfortable with the liquidity position. But — and also, we have a couple of — 2 more sanctions received during the last month, which we are working on it. With next 10 to 15 days, we will be able to get 2 sanctions from 2 banks. So we should be very comfortable on this position — liquidity position.

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Yalamati Srinivasa Chakravarti, Shriram City Union Finance Limited – MD, CEO & Non-Independent Executive Director [27]

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I think to answer your question, again, there is about — actual commitment is about INR 1,100 crores in the month of April and May, against which, we also — apart from the liquidity, we also have collections of about close to INR 1,560 crores.

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Abhijit Tibrewal, ICICI Securities Limited, Research Division – Research Analyst [28]

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Okay. Okay. Okay. So this INR 1,560 crores were in the month of April and May?

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Yalamati Srinivasa Chakravarti, Shriram City Union Finance Limited – MD, CEO & Non-Independent Executive Director [29]

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Correct. Collection.

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Abhijit Tibrewal, ICICI Securities Limited, Research Division – Research Analyst [30]

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All right.

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Ramasubramanian Chandrasekar, Shriram City Union Finance Limited – CFO [31]

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Your question, April and May commitment is INR 1,100 crores, which has all been…

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Abhijit Tibrewal, ICICI Securities Limited, Research Division – Research Analyst [32]

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Can you repeat the number once again, for April and May commitment?

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Yalamati Srinivasa Chakravarti, Shriram City Union Finance Limited – MD, CEO & Non-Independent Executive Director [33]

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1,100 — INR 1,109 crores to be exact.

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Ramasubramanian Chandrasekar, Shriram City Union Finance Limited – CFO [34]

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INR 1,100 crores.

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Abhijit Tibrewal, ICICI Securities Limited, Research Division – Research Analyst [35]

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Okay. And sir, last question is on your provisioning for personal loans. I see that — I mean you made COVID provisioning and you have increased your provision coverage ratio in almost all of your product segments. But surprisingly, I mean even though personal loans is an unsecured product, and we have not really been doing any disbursements in the product segment, we have not increased our provision coverage ratio on personal loans.

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Ramasubramanian Chandrasekar, Shriram City Union Finance Limited – CFO [36]

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No, no, we have done for all the products.

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Abhijit Tibrewal, ICICI Securities Limited, Research Division – Research Analyst [37]

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Even for personal loans?

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Ramasubramanian Chandrasekar, Shriram City Union Finance Limited – CFO [38]

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We have done — you are talking about COVID provisioning. Am I right?

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Abhijit Tibrewal, ICICI Securities Limited, Research Division – Research Analyst [39]

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No, sir. I’m talking about the provisioning coverage ratio on your personal loans product segment?

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Ramasubramanian Chandrasekar, Shriram City Union Finance Limited – CFO [40]

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Look — the point is — you have to see, is a question of the personal loan book. Earlier year, we were going to market. Now we had a lot of improvement in the personal loan over the last 1 year. Out of 15, 16 months, we are able to do cross-selling personal loans for the existing customers. So the quality has improved and the PD, LGD over the last 5 years is coming down. So there’s an improvement in the collection efficiency even in the personal loan.

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Operator [41]

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The next question is from the line of Piran Engineer from Motilal Oswal Financial Services.

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Piran Engineer, Motilal Oswal Securities Limited, Research Division – Research Analyst [42]

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Congrats on the quarter. I just want to go back to the collection efficiency question. So you all collected INR 560 crores in May and 680 — INR 560 crores in April and INR 689 crores in May on non-gold?

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Yalamati Srinivasa Chakravarti, Shriram City Union Finance Limited – MD, CEO & Non-Independent Executive Director [43]

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That is the collection is from non-gold customers. And in April, since the total shutdown, customers could not come back and redeem their gold, gold collection did not happen. In May, after we have opened branches, we were able to collect close to INR 300 crores in gold. So put together is about INR 1,000-plus crores in the month of May.

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Piran Engineer, Motilal Oswal Securities Limited, Research Division – Research Analyst [44]

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Okay. And that’s how you received 52{09c3c849cf64d23af04bfef51e68a1f749678453f0f72e4bb3c75fcb14e04d49} collection efficiency?

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Yalamati Srinivasa Chakravarti, Shriram City Union Finance Limited – MD, CEO & Non-Independent Executive Director [45]

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Exactly.

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Piran Engineer, Motilal Oswal Securities Limited, Research Division – Research Analyst [46]

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So if I may ask what percentage of our customers have not paid a single installment since the lockdown in the last 3 months?

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Yalamati Srinivasa Chakravarti, Shriram City Union Finance Limited – MD, CEO & Non-Independent Executive Director [47]

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See, that is difficult to tell you. This is — see, there are people who have opted for moratorium and then still paid 1 installment or part installment. So I have not looked at that data. But if it is important to you, I can get it. I can send the data to you.

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Piran Engineer, Motilal Oswal Securities Limited, Research Division – Research Analyst [48]

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Yes, if you can, that would be good. Sir, my second question is, basically, you said you financed 50,000 2-wheelers in the month of May. Am I right?

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Yalamati Srinivasa Chakravarti, Shriram City Union Finance Limited – MD, CEO & Non-Independent Executive Director [49]

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Yes. Correct.

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Piran Engineer, Motilal Oswal Securities Limited, Research Division – Research Analyst [50]

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So I’m guessing that is preowned and new, both.

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Yalamati Srinivasa Chakravarti, Shriram City Union Finance Limited – MD, CEO & Non-Independent Executive Director [51]

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No, no, no. I’m talking about only new.

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Piran Engineer, Motilal Oswal Securities Limited, Research Division – Research Analyst [52]

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Sir, but what was the industry auto volumes in the month of May? I believe it was like 1.5 lakh, 2 lakh.

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Yalamati Srinivasa Chakravarti, Shriram City Union Finance Limited – MD, CEO & Non-Independent Executive Director [53]

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It’s around 2,40,000, 2,50,000.

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Piran Engineer, Motilal Oswal Securities Limited, Research Division – Research Analyst [54]

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So you financed 1 in 4 or 5 vehicles that were sold in the month of May all over India?

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Yalamati Srinivasa Chakravarti, Shriram City Union Finance Limited – MD, CEO & Non-Independent Executive Director [55]

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Correct.

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Piran Engineer, Motilal Oswal Securities Limited, Research Division – Research Analyst [56]

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Okay. So if I may ask, why was the — how did you all get so much market share, like were the competitors or our peers were not in the market, or such a sharp market share gain is…

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Yalamati Srinivasa Chakravarti, Shriram City Union Finance Limited – MD, CEO & Non-Independent Executive Director [57]

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No, no, no. See, on such a small volume, you cannot take it as a market share gain or anything. Probably you’re better off — we are better off — we are better prepared to be in the market the moment it is opened.

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Piran Engineer, Motilal Oswal Securities Limited, Research Division – Research Analyst [58]

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Okay. But overall competitors also at the dealer points in May, what is the competitive landscape now?

——————————————————————————–

Yalamati Srinivasa Chakravarti, Shriram City Union Finance Limited – MD, CEO & Non-Independent Executive Director [59]

——————————————————————————–

Some of them are present.

——————————————————————————–

Piran Engineer, Motilal Oswal Securities Limited, Research Division – Research Analyst [60]

——————————————————————————–

Okay. Okay. That was my only thing. If you can just get back on the percentage of customers who haven’t paid since April, that would be great.

——————————————————————————–

Yalamati Srinivasa Chakravarti, Shriram City Union Finance Limited – MD, CEO & Non-Independent Executive Director [61]

——————————————————————————–

Yes.

——————————————————————————–

Operator [62]

——————————————————————————–

The next question is from the line of Rajeev Agrawal from DoorDarshi Advisors.

——————————————————————————–

Rajeev Agrawal, [63]

——————————————————————————–

The first question is on your Slide 14, where you have given the ALM data. You had assumed that the inflow is around INR 2,300 crores and outflow is around INR 1,700 crores in the month of April and May. So can you confirm what has been your actual experience? And therefore, what does the liquidity look like as of May 31?

——————————————————————————–

Ramasubramanian Chandrasekar, Shriram City Union Finance Limited – CFO [64]

——————————————————————————–

Okay. We — with reference to the liability thing, I was telling that we had an opening balance on 31st March of INR 2,000 crores, and we continue to have INR 2,000 crores liquidity even today. So — and we — in spite of it, we are able to raise some — as I told you in the earlier thing, we are able to raise some INR 350 crores of money, and we have a couple of more proposals in hand. So the liabilities for the last 2 months, actually the actual payout was around INR 1,100 crores and the schedule inflow as we are told that we are able to collect INR 550 crores and INR 700 crores during the last month — last 2 months.

——————————————————————————–

Yalamati Srinivasa Chakravarti, Shriram City Union Finance Limited – MD, CEO & Non-Independent Executive Director [65]

——————————————————————————–

No, no, Chandru, it’s INR 1,000 crores in the month of May, your gold collection, your…

——————————————————————————–

Ramasubramanian Chandrasekar, Shriram City Union Finance Limited – CFO [66]

——————————————————————————–

Yes. So this is — collections were close to around INR 1,500 crores, INR 1,600 crores. And the commitment was close to INR 1,100 crores, and we are able to have liquidity balance of more than INR 2,000 crores even now. Yes? Any other point?

——————————————————————————–

Rajeev Agrawal, [67]

——————————————————————————–

Yes. Okay. And in the MSME book, right, and MSME book is primarily cash flow-based lending, so what is the typical collateral do you — like for how much — what percentage of the book would you have a collateral and what is the typical loan-to-value? Can you confirm on that?

——————————————————————————–

Yalamati Srinivasa Chakravarti, Shriram City Union Finance Limited – MD, CEO & Non-Independent Executive Director [68]

——————————————————————————–

About 80{09c3c849cf64d23af04bfef51e68a1f749678453f0f72e4bb3c75fcb14e04d49} of the MSME book is collateralized. Loan-to-values will be around anywhere from 50 to — between 50{09c3c849cf64d23af04bfef51e68a1f749678453f0f72e4bb3c75fcb14e04d49} to 60{09c3c849cf64d23af04bfef51e68a1f749678453f0f72e4bb3c75fcb14e04d49}. Entire 2-wheeler book obviously is collateralized, so the personal loan book, personal loans, unsecured. Preowned 2-wheeler, again, collateralized, has an asset backing. Auto loans, obviously, has asset backing. Gold has asset backing. So on a — if you look at the entire book, probably about…

——————————————————————————–

Ramasubramanian Chandrasekar, Shriram City Union Finance Limited – CFO [69]

——————————————————————————–

15{09c3c849cf64d23af04bfef51e68a1f749678453f0f72e4bb3c75fcb14e04d49}. 15{09c3c849cf64d23af04bfef51e68a1f749678453f0f72e4bb3c75fcb14e04d49} of the book. 85{09c3c849cf64d23af04bfef51e68a1f749678453f0f72e4bb3c75fcb14e04d49} is secured.

——————————————————————————–

Yalamati Srinivasa Chakravarti, Shriram City Union Finance Limited – MD, CEO & Non-Independent Executive Director [70]

——————————————————————————–

85{09c3c849cf64d23af04bfef51e68a1f749678453f0f72e4bb3c75fcb14e04d49}, yes.

——————————————————————————–

Rajeev Agrawal, [71]

——————————————————————————–

85{09c3c849cf64d23af04bfef51e68a1f749678453f0f72e4bb3c75fcb14e04d49}, sir?

——————————————————————————–

Ramasubramanian Chandrasekar, Shriram City Union Finance Limited – CFO [72]

——————————————————————————–

85{09c3c849cf64d23af04bfef51e68a1f749678453f0f72e4bb3c75fcb14e04d49} of the whole — the company’s loans secured, 15{09c3c849cf64d23af04bfef51e68a1f749678453f0f72e4bb3c75fcb14e04d49} is unsecured.

——————————————————————————–

Rajeev Agrawal, [73]

——————————————————————————–

Got it. Got it. And especially in the MSME, you mentioned 80{09c3c849cf64d23af04bfef51e68a1f749678453f0f72e4bb3c75fcb14e04d49} is collateralized. Do you see a difference in the delinquency for the remaining 20{09c3c849cf64d23af04bfef51e68a1f749678453f0f72e4bb3c75fcb14e04d49} versus the 80{09c3c849cf64d23af04bfef51e68a1f749678453f0f72e4bb3c75fcb14e04d49} in the MSME book? Just want to see if the behavior of the customer…

——————————————————————————–

Yalamati Srinivasa Chakravarti, Shriram City Union Finance Limited – MD, CEO & Non-Independent Executive Director [74]

——————————————————————————–

No. Basically, on — in this period, no, I have not seen anything. In fact, even prior to COVID also, there’s not too much of a variance between a securitized or unsecuritized book. It’s just that we do these unsecured loans because of the very small loans, like loans up to INR 5 lakhs, we avoid taking collateral because it involves a lot of expenses for those small loans.

——————————————————————————–

Rajeev Agrawal, [75]

——————————————————————————–

Right, right. And you mentioned that in the personal book, you don’t have any collateral, right? Is that correct?

——————————————————————————–

Yalamati Srinivasa Chakravarti, Shriram City Union Finance Limited – MD, CEO & Non-Independent Executive Director [76]

——————————————————————————–

Yes. Yes, correct.

——————————————————————————–

Rajeev Agrawal, [77]

——————————————————————————–

And so that is where you also seem to have the highest NPA, right? So…

——————————————————————————–

Yalamati Srinivasa Chakravarti, Shriram City Union Finance Limited – MD, CEO & Non-Independent Executive Director [78]

——————————————————————————–

Let me put it this way. See, about 12 to 14 months previous year, we were doing personal loan to — in the market. So obviously, looking at the yields, the customers are, I would say — again, these are the customers who have impaired credit history or have not borrowed anywhere or do not have a steady business. So we wanted to move away from this customer segment, and we moved away. So for the last 1 year, the entire personal loan book is built on my existing customers who have finished a cycle of loan with me. So the quality, probably in the next 3 to 4 quarters, we will see a very good improvement in the personal loan delinquency book, as the whole book is running out.

——————————————————————————–

Rajeev Agrawal, [79]

——————————————————————————–

Right. And what percentage of the current customer base in personal loans would be your existing versus new? Like could you give some…

——————————————————————————–

Yalamati Srinivasa Chakravarti, Shriram City Union Finance Limited – MD, CEO & Non-Independent Executive Director [80]

——————————————————————————–

Anywhere around 60{09c3c849cf64d23af04bfef51e68a1f749678453f0f72e4bb3c75fcb14e04d49} of old is still going on. 40{09c3c849cf64d23af04bfef51e68a1f749678453f0f72e4bb3c75fcb14e04d49} is new.

——————————————————————————–

Rajeev Agrawal, [81]

——————————————————————————–

Okay. And it is a new customer which is much more assessed for delinquent — being delinquent, right? So old customer, you already know them.

——————————————————————————–

Yalamati Srinivasa Chakravarti, Shriram City Union Finance Limited – MD, CEO & Non-Independent Executive Director [82]

——————————————————————————–

I am sorry, I didn’t get you.

——————————————————————————–

Rajeev Agrawal, [83]

——————————————————————————–

Yes. So in the personal loan, I’m assuming that if the customer is an old customer, then you have the credit history and they tend to be not delinquent, right? So it’s the 60{09c3c849cf64d23af04bfef51e68a1f749678453f0f72e4bb3c75fcb14e04d49} that’s…

——————————————————————————–

Yalamati Srinivasa Chakravarti, Shriram City Union Finance Limited – MD, CEO & Non-Independent Executive Director [84]

——————————————————————————–

They tend to be better at paying than a guy who is coming off from the market.

——————————————————————————–

Rajeev Agrawal, [85]

——————————————————————————–

Got it. Got it. And if I were to look at your subsegments, right, so MSME, Gold Loans, 2-wheeler, auto and personal, if you were to look at the return on equity for each of the subsegments, how would you think? Is it similar across each of the subsegments?

——————————————————————————–

Yalamati Srinivasa Chakravarti, Shriram City Union Finance Limited – MD, CEO & Non-Independent Executive Director [86]

——————————————————————————–

See, it’s difficult to look at it this way because the teams, the employees are — we do not — there are a lot of common costs. So we don’t look at product-wise. The reason being, everything is shared, right from manpower to our space, so everything is shared. People are — people — a guy who’s doing 2-wheeler will also do a personal loan cross-sell. A guy who is doing MSME will also do a personal loan cross-sell. The 2-wheeler people staff at the branch, also the branch manager and all, also manage gold loans. So as a product-wise, it is difficult because cost — apportionment of cost is difficult.

——————————————————————————–

Rajeev Agrawal, [87]

——————————————————————————–

Right. Right. But then how do you prioritize getting capital to one segment versus others? Like in today’s environment, where, I guess, you have plenty of opportunities, and you’d need to decide where you want to give out the loans, how would you prioritize?

——————————————————————————–

Yalamati Srinivasa Chakravarti, Shriram City Union Finance Limited – MD, CEO & Non-Independent Executive Director [88]

——————————————————————————–

See, that’s basically, again, on my — when the capital is scarce, the decision is based on for what product they can raise capital in the market. For an — for example, on a — though the unsecured loan could give me a 200, 300 basis points better return even on the contract level, but then if I’m not able to raise money, let us say, on securitization for an unsecured book, and there is only demand — a lot of demand for securitization, I will focus on funding an asset — funding a customer where I have an asset backing, could be a 2-wheeler, could be an auto or it could be a gold.

——————————————————————————–

Rajeev Agrawal, [89]

——————————————————————————–

Right. Got it. Okay. And then a few more quick questions. One is on this INR 3 lakh crore package, which would have — or should have helped our customer base significantly. So can you give a sense of how many of our customers would be eligible for that package? And what is the traction you’re seeing so far on that?

——————————————————————————–

Yalamati Srinivasa Chakravarti, Shriram City Union Finance Limited – MD, CEO & Non-Independent Executive Director [90]

——————————————————————————–

Most of my customers are proprietary concerns in the sense they run their business on their own, they’re one guy. So most of them will not be eligible because it will be — loans will be in individual names. So most of them will not be eligible, number one. Number two, I have — as I said, I have called and spoken, I’m speaking, in fact, to a lot of customers on a regular basis. None of the customers that I’ve spoken to have reacted positively. They are saying they are still not able to get any money from anywhere. So sorry to say this, but most of these customers, I mean, I have spoken to a few customers who trade in, say — in fact, yesterday, I’ve spoken to a couple of customers who — not yesterday, day before yesterday, who are involved in aquaculture, then a couple of customers who are involved in supplying to these aquaculture firms. I’ve spoken to a couple of rice millers, a couple of granite unit — polishing unit owners. It’s still very early day. They are not sure when the money will reach them, whether they’ll be able to get the money.

——————————————————————————–

Rajeev Agrawal, [91]

——————————————————————————–

Okay. Okay. So this package may not have helped again by product. And then on the gold loan, when I look at your peers like Muthoot and Manappuram, they typically lend 22{09c3c849cf64d23af04bfef51e68a1f749678453f0f72e4bb3c75fcb14e04d49} plus. We are around 18{09c3c849cf64d23af04bfef51e68a1f749678453f0f72e4bb3c75fcb14e04d49}. So are we targeting a different business, a different customer segment here? And is there an opportunity for us to improve our yield there?

——————————————————————————–

Yalamati Srinivasa Chakravarti, Shriram City Union Finance Limited – MD, CEO & Non-Independent Executive Director [92]

——————————————————————————–

See, there are a lot of reasons why we are 18{09c3c849cf64d23af04bfef51e68a1f749678453f0f72e4bb3c75fcb14e04d49}. One, for SCUF, we are not a pure-play gold loan company, number one. Number two, we are using our existing infrastructure wherever it is to do the gold loan. Third, gold loan is a pull business. We don’t advertise our presence. Four, most of my branches are located in — I mean, if you go around and look, they’re either in the first floor or the second floor. So it’s not easy for customers to reach, there are other avenues available. So consequence is basically, this is basically — most of this gold loan again is a — is kind of a business that is coming through referrals of my existing customers. So we are happy with that yield because unless — if you want a better yield, then you need to do a very aggressive focusing business in gold. Then you can ask me, why don’t you advertise? Right now, we are confined only to 5 states in the country for gold loans. So unless I increase my presence across, my footprint, there is no point in pushing — spending money on advertisement. But to that — on that line, we — probably by end of June, we will be starting in about 20, 25 outlets — gold loan in 20, 25 outlets in the north. And the plan is by the end of the year, we should be starting gold loan in all the 900 branches.

This is the — if you compare with the pure-play gold loans, probably my network would be 1/3 of some of these players or even smaller. But then I think that is when we will be able to pull in more customers and probably increase the yield in the gold. But right now, the business that is happening is mostly through referrals and most of these gold loan customers that we have today are our existing customers who come and pledge with you on a regular basis. To give you this thing — idea, about 60{09c3c849cf64d23af04bfef51e68a1f749678453f0f72e4bb3c75fcb14e04d49} of my gold loan customers come back and pledge again and again.

——————————————————————————–

Operator [93]

——————————————————————————–

The next question is from the line of Prashanth Sridhar from SBI Mutual Fund.

——————————————————————————–

Prashanth Sridhar, [94]

——————————————————————————–

Yes. I hope you’re all doing fine. Sir, could you just talk about any deposit outflows that we would have seen in April and May? And what sort of risk you see here going forward?

——————————————————————————–

Yalamati Srinivasa Chakravarti, Shriram City Union Finance Limited – MD, CEO & Non-Independent Executive Director [95]

——————————————————————————–

Deposits, I’m very, very happy to inform you that we have not seen any outflow in March, April, May. In fact, there is a positive net accretion of deposits in all these months.

——————————————————————————–

Prashanth Sridhar, [96]

——————————————————————————–

That’s great to hear, sir. And what is the rate of interest on our deposits right now?

——————————————————————————–

Yalamati Srinivasa Chakravarti, Shriram City Union Finance Limited – MD, CEO & Non-Independent Executive Director [97]

——————————————————————————–

It’s about 8-point — Chandru, if I remember correctly, it’s 8.2{09c3c849cf64d23af04bfef51e68a1f749678453f0f72e4bb3c75fcb14e04d49}.

——————————————————————————–

Ramasubramanian Chandrasekar, Shriram City Union Finance Limited – CFO [98]

——————————————————————————–

It varies from 8{09c3c849cf64d23af04bfef51e68a1f749678453f0f72e4bb3c75fcb14e04d49} to 8.5{09c3c849cf64d23af04bfef51e68a1f749678453f0f72e4bb3c75fcb14e04d49} depending upon what year — tenure also. So weighted average will be around 8.25{09c3c849cf64d23af04bfef51e68a1f749678453f0f72e4bb3c75fcb14e04d49}, 8.3{09c3c849cf64d23af04bfef51e68a1f749678453f0f72e4bb3c75fcb14e04d49}.

——————————————————————————–

Prashanth Sridhar, [99]

——————————————————————————–

Okay. And you mentioned that out of the total liability outflow of INR 1,600 crores in April and May, some part was related to FD, did I hear that right?

——————————————————————————–

Ramasubramanian Chandrasekar, Shriram City Union Finance Limited – CFO [100]

——————————————————————————–

Yes, correct.

——————————————————————————–

Yalamati Srinivasa Chakravarti, Shriram City Union Finance Limited – MD, CEO & Non-Independent Executive Director [101]

——————————————————————————–

Actually, we need to — give me 1 minute, I will tell you.

——————————————————————————–

Ramasubramanian Chandrasekar, Shriram City Union Finance Limited – CFO [102]

——————————————————————————–

FD also, there will be fresh inflow and outflow.

——————————————————————————–

Yalamati Srinivasa Chakravarti, Shriram City Union Finance Limited – MD, CEO & Non-Independent Executive Director [103]

——————————————————————————–

No. I’ll tell you what it is. It is INR 113 crores in the month of April and INR 119 crores in the month of May.

——————————————————————————–

Prashanth Sridhar, [104]

——————————————————————————–

Okay. Okay. But you’re saying since you’ve got more outflows, the net affected the gross? Sorry, no. Okay. Okay.

——————————————————————————–

Yalamati Srinivasa Chakravarti, Shriram City Union Finance Limited – MD, CEO & Non-Independent Executive Director [105]

——————————————————————————–

There is a net inflow.

——————————————————————————–

Ramasubramanian Chandrasekar, Shriram City Union Finance Limited – CFO [106]

——————————————————————————–

More inflow. Inflow is much — INR 100 crores more than outflow for the 2 months.

——————————————————————————–

Operator [107]

——————————————————————————–

The next question is from the line of Shubhranshu Mishra from BOB Capital Markets.

——————————————————————————–

Shubhranshu Mishra, BOB Capital Markets Limited, Research Division – Analyst [108]

——————————————————————————–

Sir, quickly on this 2-wheeler disbursement that you have done, my thought is that should it scare me because 2-wheeler is largely cash headwind and we’ve gone out and disbursed in the month of May? Have we changed any kind of underwriting policy, credit appraisal for the 2-wheeler customer?

——————————————————————————–

Yalamati Srinivasa Chakravarti, Shriram City Union Finance Limited – MD, CEO & Non-Independent Executive Director [109]

——————————————————————————–

No. I’ll tell you why. I’m very confident on the 2-wheeler business, Shubhranshu. And I think we have cracked it like nobody else in the business. Two is, I anticipate 2-wheelers to do well even in this year because of the social distancing. Even now, we are seeing a good number of inquiries coming in. In these 10 days, we have already disbursed about 10,000 vehicles. There is a lot of demand. I anticipate good demand. If you look at even the manufacturing data, I think most of the manufacturers have now — are ramping up production to reach 60{09c3c849cf64d23af04bfef51e68a1f749678453f0f72e4bb3c75fcb14e04d49}, 70{09c3c849cf64d23af04bfef51e68a1f749678453f0f72e4bb3c75fcb14e04d49} of the pre-COVID production levels. Also, the stocks in most of the dealer points is running off. So now the BS-VI, some of the dealerships also need these BS-VI vehicles.

——————————————————————————–

Shubhranshu Mishra, BOB Capital Markets Limited, Research Division – Analyst [110]

——————————————————————————–

Okay. So how are we different? Like what is our strength here?

——————————————————————————–

Yalamati Srinivasa Chakravarti, Shriram City Union Finance Limited – MD, CEO & Non-Independent Executive Director [111]

——————————————————————————–

I think simple, very simple. There is no secret — the secret sauce, I would say, is the relationship that my team is able to build with the dealers over a period of years and the support that we have extended to them, and basically, the comfort level that the dealer derives from my teams. Our decision-making is decentralized; decision-making happens at a — most of the time happens at a branch level and the comfort that they derive from that and a quick turnaround time. Just these 2. There is nothing — no other factor.

——————————————————————————–

Shubhranshu Mishra, BOB Capital Markets Limited, Research Division – Analyst [112]

——————————————————————————–

And we haven’t changed any credit underwriting or appraisal policies for 2-wheelers?

——————————————————————————–

Yalamati Srinivasa Chakravarti, Shriram City Union Finance Limited – MD, CEO & Non-Independent Executive Director [113]

——————————————————————————–

As of now, no. As of now, no.

——————————————————————————–

Shubhranshu Mishra, BOB Capital Markets Limited, Research Division – Analyst [114]

——————————————————————————–

Got it. And in terms of SME financing, sir, what percentage of our customers would be in essential services versus nonessential services? And given the fact that they are under cash flow stress, are we thinking of giving them any kind of top-up loans or anything that can help them start their business? Because I think after lockdown, they would need some kind of working capital as well to restart their business as well?

——————————————————————————–

Yalamati Srinivasa Chakravarti, Shriram City Union Finance Limited – MD, CEO & Non-Independent Executive Director [115]

——————————————————————————–

True. What you say is true. See, most of these people who are involved in the essential services, when I’ve talked to them, they were saying that their credit cycle has shortened because the distributors now are investing only on cash. So they were forced to put in more money. So that’s one of the reasons. Also, they were saying that though they have money, and they were doing business even during the lockdown, they were not paying the EMIs because their cash purchases have increased, right? See, I think it’s early days, but we are — what we are doing, we are actually going and meeting these customers and looking at what level of business now the volumes have come back. And we will take a call basing on that. But we will start only in the month of July. Disbursement for SME, we will start only in July. But that — as I said earlier, that we will start the disbursement only to our existing customers, where we have a track record and where we feel that they need this working capital support.

——————————————————————————–

Shubhranshu Mishra, BOB Capital Markets Limited, Research Division – Analyst [116]

——————————————————————————–

Right. But we are open to giving top-up loans. Is that correct?

——————————————————————————–

Yalamati Srinivasa Chakravarti, Shriram City Union Finance Limited – MD, CEO & Non-Independent Executive Director [117]

——————————————————————————–

Yes. Yes.

——————————————————————————–

Shubhranshu Mishra, BOB Capital Markets Limited, Research Division – Analyst [118]

——————————————————————————–

Sure, sir. And sir, how many people do we have in collections? And what kind of credit costs should we expect in FY ’21? If you can highlight that.

——————————————————————————–

Yalamati Srinivasa Chakravarti, Shriram City Union Finance Limited – MD, CEO & Non-Independent Executive Director [119]

——————————————————————————–

Collections, we have something like roughly around 6,000 people across the country. Credit costs, very early days. See, basically, if you take out the moratorium, since the moratorium, you don’t have to look at the moratorium. But I think — see, for me to — my gut feeling is for the businesses to reach 80{09c3c849cf64d23af04bfef51e68a1f749678453f0f72e4bb3c75fcb14e04d49}, 90{09c3c849cf64d23af04bfef51e68a1f749678453f0f72e4bb3c75fcb14e04d49} of their earlier volumes will take at least another 6 months.

So we may see probably — we may see a spike — see, during the demonetization time, we have seen a 170 basis points of GNPA jump, and we have been able to recover that in the next 9 months. So there may be a temporary dip, but very difficult to tell you right now. But there could be a 100 basis points jump on the gross NPAs, but I’m not really worried about it because I’ve seen — through cycles, I’ve seen that next 3 to 6 months, we should be able to do a — get a clawback on this.

——————————————————————————–

Operator [120]

——————————————————————————–

The next question is from the line of Pratik Chheda from IIFL Securities.

——————————————————————————–

Pratik Chheda, IIFL Research – Associate [121]

——————————————————————————–

I was just looking at the GNPAs in the Gold Loan segment. I mean I understand the customers not being able to come and pay during the lockdown, but over the last 4 quarters, the GNPAs in the Gold Loan segment have swiftly moved up from around 2{09c3c849cf64d23af04bfef51e68a1f749678453f0f72e4bb3c75fcb14e04d49} to around 4{09c3c849cf64d23af04bfef51e68a1f749678453f0f72e4bb3c75fcb14e04d49}. So just wanted to understand what is the reason of this increase? And how do you see the credit cost in this segment going forward? And what are the LTVs in the Gold Loan segment?

——————————————————————————–

Yalamati Srinivasa Chakravarti, Shriram City Union Finance Limited – MD, CEO & Non-Independent Executive Director [122]

——————————————————————————–

Gold loan LTV is — okay, I’ll answer your last question first. The gold loan LTV today on the book is around 60{09c3c849cf64d23af04bfef51e68a1f749678453f0f72e4bb3c75fcb14e04d49}. That’s one. The other point is, we — earlier, when the gold prices were a little subdued, we were following a very aggressive auction policy, where any overdue account, we used to issue notices and immediately do an auction of the gold loan. As the price has started increasing, we have decided — since we have enough collateral, we’ve decided we’ll give them — we’ll give the customers time — extra time. Though, yes, it affects my GNPA book, but we thought we can afford to do it because as the gold loan price is increasing, we wanted to take a little relaxed approach towards auctioning the gold. But you should see that coming down sequentially in the next 2 quarters.

——————————————————————————–

Pratik Chheda, IIFL Research – Associate [123]

——————————————————————————–

Okay, sir. The gold holding…

——————————————————————————–

Ramasubramanian Chandrasekar, Shriram City Union Finance Limited – CFO [124]

——————————————————————————–

The credit cost for the gold loans, it’s hardly a few lakhs. In fact, it is in decimals only.

——————————————————————————–

Pratik Chheda, IIFL Research – Associate [125]

——————————————————————————–

Okay. Okay. So basically, the holding period of the gold of the nonperforming customers has increased?

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Ramasubramanian Chandrasekar, Shriram City Union Finance Limited – CFO [126]

——————————————————————————–

Yes.

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Yalamati Srinivasa Chakravarti, Shriram City Union Finance Limited – MD, CEO & Non-Independent Executive Director [127]

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Exactly.

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Operator [128]

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The next question is from the line of Anitha Rangan from HSBC Asset Management.

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Anitha Rangan, Hsbc Asset Management (India) Private Limited – VP of Fixed Income [129]

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Just wanted to understand in terms of liquidity, like just one more question here. Were you able to participate in any of the — like TLTROs from banks? And generally, I mean, what we’ve heard is like banks are pretty risk covered. So did you calculate any of the risk aversion from banks in terms of like getting sanctions? Or are there like delays in processes getting completed in terms of fresh sanctions and so on? What is your experience?

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Ramasubramanian Chandrasekar, Shriram City Union Finance Limited – CFO [130]

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See, we got around INR 350 crores last week from SIDBI, so — under a special scheme. So things are moving, but I think — we don’t think most of the banks are willing to lend money. So we are now also getting — we’re likely to get some inflow from PCG 2.0. So special scheme, as I told you, we got INR 350 crores.

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Yalamati Srinivasa Chakravarti, Shriram City Union Finance Limited – MD, CEO & Non-Independent Executive Director [131]

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To answer your question, Anitha, is that the other thing is — yes, really banks are risk averse, so I don’t blame them for that. But we have proposals pending with almost all the banks. And as far as delay is concerned, yes, it’s taking time. Hopefully, things that used to move in a week, 10 days, now it’s taking a month. Probably, it’s also because they are also not working at full capacity. But we have no worries on that side. I think the signals that we are getting is that most of the banks are waiting for the results to be declared. And we think that we should be able to get money in the — probably before end of June and some sanctions in July.

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Operator [132]

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The next question is from the line of [Ankur Jain] from — an investment adviser.

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Unidentified Analyst, [133]

——————————————————————————–

I had a question about the provisions and moratorium from banks. And excuse me in case you have already discussed this part in your opening remarks because I missed a part of it. So my question is that about the COVID-related provisioning of INR 426 crores. What percentage of this provision may actually have to be written off? Or do you think over a period of time, we’ll be able to clawback most of this?

——————————————————————————–

Yalamati Srinivasa Chakravarti, Shriram City Union Finance Limited – MD, CEO & Non-Independent Executive Director [134]

——————————————————————————–

See, I think from a business point of view — I’ll leave my head of — our CFO to answer that. But from a business point of view, we should be able to recover almost 90{09c3c849cf64d23af04bfef51e68a1f749678453f0f72e4bb3c75fcb14e04d49} of this. Okay? I’ll leave Chandru to answer your question more elaborately.

——————————————————————————–

Ramasubramanian Chandrasekar, Shriram City Union Finance Limited – CFO [135]

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Yes. So with reference to COVID provisioning, I think we have already put up some of the information on the collection what we have done. And we have also given moratorium for the last 3 months to different customers, close to around INR 2,500 crores for non-gold and INR 350 crores moratorium for the last 3 months. So basically, what we did is we increased our PD…

——————————————————————————–

Yalamati Srinivasa Chakravarti, Shriram City Union Finance Limited – MD, CEO & Non-Independent Executive Director [136]

——————————————————————————–

No, no, Chandru. Chandru, I think his question is on how much you think we need to write-off of this INR 426 crores?

——————————————————————————–

Ramasubramanian Chandrasekar, Shriram City Union Finance Limited – CFO [137]

——————————————————————————–

Yes. That’s what. So basically, keeping in mind this provisioning, we expect, this question can be exactly answered over the next 6 to 8 quarters, but still 1 more tranche of moratorium also is coming in. So as — the probability of 85{09c3c849cf64d23af04bfef51e68a1f749678453f0f72e4bb3c75fcb14e04d49} to 90{09c3c849cf64d23af04bfef51e68a1f749678453f0f72e4bb3c75fcb14e04d49} is what we expect as of this. But going forward, we will have to see on the data of actual collections, moratorium benefit…

——————————————————————————–

Yalamati Srinivasa Chakravarti, Shriram City Union Finance Limited – MD, CEO & Non-Independent Executive Director [138]

——————————————————————————–

I think to give you another insight into this is if you look at my absolute losses, write-off for the last 15, 20 quarters, it never crossed — it’s between 2.5{09c3c849cf64d23af04bfef51e68a1f749678453f0f72e4bb3c75fcb14e04d49} to 3{09c3c849cf64d23af04bfef51e68a1f749678453f0f72e4bb3c75fcb14e04d49}. And I don’t see any reason why it will — there will be a spike on this, probably 10, 20 basis points at best of increase. I don’t — I’m not really worried about it moving more than that — beyond that.

——————————————————————————–

Unidentified Analyst, [139]

——————————————————————————–

Right. Yes, got it. And one more thing about this provisioning of INR 426 crores, does this cover only the first moratorium which was offered? Or does it cover the second moratorium also which was offered?

——————————————————————————–

Yalamati Srinivasa Chakravarti, Shriram City Union Finance Limited – MD, CEO & Non-Independent Executive Director [140]

——————————————————————————–

No. The…

——————————————————————————–

Ramasubramanian Chandrasekar, Shriram City Union Finance Limited – CFO [141]

——————————————————————————–

Tranche, first tranche of moratorium.

——————————————————————————–

Unidentified Analyst, [142]

——————————————————————————–

First tranche. So there is incremental provisioning which may come in the subsequent quarters also?

——————————————————————————–

Ramasubramanian Chandrasekar, Shriram City Union Finance Limited – CFO [143]

——————————————————————————–

When we close the Q1 books, we have to see how things move. Then we’ll take a call on them.

——————————————————————————–

Unidentified Analyst, [144]

——————————————————————————–

Right. And on the moratorium from banks, has the company applied from moratorium from banks? And have we received any in case we have applied?

——————————————————————————–

Yalamati Srinivasa Chakravarti, Shriram City Union Finance Limited – MD, CEO & Non-Independent Executive Director [145]

——————————————————————————–

Yes, we did apply. We did apply for a moratorium. We have received from 3 banks, but that’s also not much of a — not much. So it’s basically HSBC, Union Bank and Indian Bank we’ve got our moratorium from.

——————————————————————————–

Unidentified Analyst, [146]

——————————————————————————–

So what percentage — I mean, for whatever we applied, what percentage in value terms have we received the moratorium?

——————————————————————————–

Yalamati Srinivasa Chakravarti, Shriram City Union Finance Limited – MD, CEO & Non-Independent Executive Director [147]

——————————————————————————–

Percent?

——————————————————————————–

Ramasubramanian Chandrasekar, Shriram City Union Finance Limited – CFO [148]

——————————————————————————–

It’s hardly 3{09c3c849cf64d23af04bfef51e68a1f749678453f0f72e4bb3c75fcb14e04d49}. It’s hardly — negligible. Just we applied it, and we got some 2, 3 branches. That’s all. And that’s on the interest component. So it is actually negligible.

——————————————————————————–

Unidentified Analyst, [149]

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Okay. So do you intend to — I mean, I wanted to basically understand on the liquidity part that is moratorium an important part for us to keep our business going in terms of disbursement also?

——————————————————————————–

Yalamati Srinivasa Chakravarti, Shriram City Union Finance Limited – MD, CEO & Non-Independent Executive Director [150]

——————————————————————————–

I’ll put it this way. Let me rephrase your question. You are asking me whether if I don’t get a moratorium, if my disbursements also will get affected?

——————————————————————————–

Unidentified Analyst, [151]

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Right. Yes.

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Yalamati Srinivasa Chakravarti, Shriram City Union Finance Limited – MD, CEO & Non-Independent Executive Director [152]

——————————————————————————–

It may, if we don’t get a moratorium, but I’m not looking at moratorium for disbursements. We are — as I mentioned, we have another close to INR 700 crores on the PCG, which paperwork is pending, which we should be able to do it, and we raise that INR 700 crores probably in the next 2 to 3 weeks. Apart from that, we also have in various stages of consideration other proposals with banks. So I’m not really worried. Even if I don’t get a moratorium today, I’m not really worried. It may help, but — see, 50{09c3c849cf64d23af04bfef51e68a1f749678453f0f72e4bb3c75fcb14e04d49} of my borrowings is from banks, right? So it’s not that 100{09c3c849cf64d23af04bfef51e68a1f749678453f0f72e4bb3c75fcb14e04d49}, but 50{09c3c849cf64d23af04bfef51e68a1f749678453f0f72e4bb3c75fcb14e04d49} moratorium could help meeting some — probably adding some cash flow to the — some cash — help in retaining some cash in the company. But looking at the sanctions — sorry, proposals that are with banks and the reactions that we have now…

(technical difficulty)

——————————————————————————–

Unidentified Analyst, [153]

——————————————————————————–

Hello?

——————————————————————————–

Ramasubramanian Chandrasekar, Shriram City Union Finance Limited – CFO [154]

——————————————————————————–

Hello. I think — am I audible?

——————————————————————————–

Unidentified Analyst, [155]

——————————————————————————–

Yes, yes. You are audible.

——————————————————————————–

Ramasubramanian Chandrasekar, Shriram City Union Finance Limited – CFO [156]

——————————————————————————–

I think Chakravarti’s line just got cut off. I will continue. So we expect some couple of — some fresh disbursements. We have sufficient cash available, is point number one. And we are not looking into moratorium very seriously. It may come, it may not come. We are not just over. And we are looking into the fresh borrowings, which we expect things are moving in quite a reasonable pace at this point of time. So that money we’ll be using it for disbursement.

——————————————————————————–

Unidentified Analyst, [157]

——————————————————————————–

Right. Sir, I have one more question on basically Shriram Housing Finance. Now when I read about the business of Shriram Housing Finance and the customer profile that you cater to, it seemed very much within your circle of competence, the customer profile and the territories which you were targeting. But the business did not perform in the past few years to the expectations that it’s only after a couple of CEO changes and CFO changes, which happened in the company, and now we are seeing results which are different, which are very healthy. So I just wanted to understand from you on the strategy part that how is the current practice different from earlier practice? And could you please give some color on what exactly happened earlier? I mean, was there some corporate governance issue that led to the attrition at top level? I just wanted to understand this part better.

——————————————————————————–

Yalamati Srinivasa Chakravarti, Shriram City Union Finance Limited – MD, CEO & Non-Independent Executive Director [158]

——————————————————————————–

Yes. Yes. Got it. Got it. There is no corporate governance issue at all. It’s just that the methodology that was chosen by the earlier CEO was different, whereas the current CEO, he’s also been with us for a long time. It’s not that he is not — Ravi Subramanian, the current CEO, who is handling this business, was handling our business loans out of Bombay earlier — Mumbai earlier. So he’s a veteran of the industry. So his — the strategy — I mean, earlier CEO has chosen a strategy to go to the market with our future — direct selling team and DSA team. Whereas Ravi’s — after Ravi coming in, he has actually realized that it is better for him to work with the existing setup, leverage on the strength of SCUF, the SCUF network, the STFC, Shriram Transport Finance network and work through those offices. And he’s also cut down on some of the direct sales team because see, he felt that it’s better to have a combination of small DSAs and a few direct sales heads. So he changed his entire approach to the business and which is producing results, both in terms of volume as well as delinquency.

——————————————————————————–

Unidentified Analyst, [159]

——————————————————————————–

So I mean — okay. So is it right to say that earlier — in the earlier practices — in the earlier practice, the customers were basically approached directly, and they were new customers, they were not from the existing STFC base? And now the customers are — it’s basically a cross-selling into STFC and SCUF?

——————————————————————————–

Yalamati Srinivasa Chakravarti, Shriram City Union Finance Limited – MD, CEO & Non-Independent Executive Director [160]

——————————————————————————–

No, it’s not just existing customers. See, the advantage when you leverage on your existing infrastructure is, one, your costs are lower; two, you’ll get a lot of references from your existing customers because existing customer may not take a loan, but you also get references from the customers, which is always much better than going out and doing a cold calling and trying to sell a loan.

——————————————————————————–

Unidentified Analyst, [161]

——————————————————————————–

Right. And any change in the — okay. I got it. Sir, just one in the MSME segment. So because of the COVID issue, do you see that a large part of our MSME business, which is to kirana stores and — do you see a long-term trend where that business could move to organized retail and the e-commerce players? And that produces some amount of stress, and how the company is in a position to deal with that?

——————————————————————————–

Yalamati Srinivasa Chakravarti, Shriram City Union Finance Limited – MD, CEO & Non-Independent Executive Director [162]

——————————————————————————–

No, I don’t see that happening any soon, e-commerce players. It should be — probably the e-commerce players and the local kirana stores will get into a partnership is what my feeling is but — and that is what I feel. The other point — another point is a large — I mean, the large players, the large big players like your Metro or your Best Buys or your — the kind of Walmart kind of guys, are actually working on plans to work with the local kirana stores much more closely. I think that’s the way — if we are living with COVID for, let us assume, next couple of years or 3 years or 4 years, I’m sure people would want to go to your local kirana store and buy rather than go into a mall or a market.

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Operator [163]

——————————————————————————–

(Operator Instructions) The next question is from the line of [Gopinath from KNR Investment]. (Operator Instructions)

——————————————————————————–

Unidentified Analyst, [164]

——————————————————————————–

Am I audible now, ma’am?

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Operator [165]

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Yes, sir.

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Unidentified Analyst, [166]

——————————————————————————–

Sir, this is regarding that 10 to 15 basis points of write-offs — excess write-off at the maximum that you are talking about in a longer run, maybe after — in 5 to 6 quarters, like that. It is completely contra to what the market perception is. How are we getting that confidence that businesses will be as usual and we’ll be able to collect all the provisioning that we — most of the provisioning that we are providing for?

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Yalamati Srinivasa Chakravarti, Shriram City Union Finance Limited – MD, CEO & Non-Independent Executive Director [167]

——————————————————————————–

Yes. I don’t know what the market — the market — I’ve never actually agreed with market for your information, number one. Number two is, this confidence is coming from the feedback that I get from my team down the level. This is basically for the last — right from the start of the lockdown to today, I am on call on every single day with my teams, not my one down, but the calls happen to the branch managers. So this is the feedback that I have from my team at the ground level. And the ground level team are involved, engaged in meeting customers on a continuous basis. So it stems from the fact that most of my customers are traders and service — are engaged in traders — trading or service industry. And they — post lockdown, they’re quickly back to their businesses and they’re able to generate some sort of an income in their businesses. My exposure to manufacturing is less than 10{09c3c849cf64d23af04bfef51e68a1f749678453f0f72e4bb3c75fcb14e04d49}, and that’s where I see stress rather than on the other segments.

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Operator [168]

——————————————————————————–

The next question is from the line of Vikas Radhakrishnan from Citibank.

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Vikas Radhakrishnan, [169]

——————————————————————————–

I just have a couple of questions. One is, what is — under the extended moratorium period allowed by RBI, what percentage of the portfolio receivables have you — are you going to allow moratorium for from your borrowers, number one?

The second thing is, on the collection efficiency, while these are still early days, I assume the ALM table that has been laid out for the March quarter assumes a 90{09c3c849cf64d23af04bfef51e68a1f749678453f0f72e4bb3c75fcb14e04d49} collection efficiency in March. So what would be the actual collection or the expected collection efficiency that you can relatively expect over the next 3 months?

And lastly, what is the outlook for new disbursement or fresh disbursement that you’re looking at for the next 3 months?

——————————————————————————–

Yalamati Srinivasa Chakravarti, Shriram City Union Finance Limited – MD, CEO & Non-Independent Executive Director [170]

——————————————————————————–

This is one question and you are taking — asking different things. Okay. On the disbursement side, as I said, the outlook on the disbursement side is, see, probably May was a lot of pending demand that has got snapped up and so we were able to do those 50,000 2-wheeler, I’m not sure. But 2-wheeler, definitely, on the 2-wheeler side, I see good demand coming back. Gold loan, some demand picking up. Personal loans has a lot of demand, but still I want to hold it on for some more time before I start disbursing personal loan. Used preowned 2-wheelers, we are getting a lot of inquiries on that. So hopefully, we should be ending up with about next 2 months — let me put it this way, from June, July, we should be able to end up with anywhere between INR 600 crores to INR 750 crores of disbursement, I mean, that’s on a conservative scale. That’s what I would aim at.

Now on the collections side, as I said, including gold, May is 52{09c3c849cf64d23af04bfef51e68a1f749678453f0f72e4bb3c75fcb14e04d49}. So June could — June — as of today, the trend looks much better than May in June. So we could end up with about 60{09c3c849cf64d23af04bfef51e68a1f749678453f0f72e4bb3c75fcb14e04d49} in June and probably reach my normal levels of efficiency by hopefully end of September. Normal levels of efficiencies of 90{09c3c849cf64d23af04bfef51e68a1f749678453f0f72e4bb3c75fcb14e04d49}-plus efficiency by end of September.

——————————————————————————–

Operator [171]

——————————————————————————–

The next question is from the line of Bunty Chawla from IDBI Mutual Fund.

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Bunty Chawla, IDBI Capital Markets & Securities Ltd., Research Division – Research Analyst [172]

——————————————————————————–

If I move to the Slide 12 and you have this

(technical difficulty).

So in that, if you can throw some light on the auto loans because there has been a good amount of improvement from Q3 to Q4 for 9{09c3c849cf64d23af04bfef51e68a1f749678453f0f72e4bb3c75fcb14e04d49}…

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Yalamati Srinivasa Chakravarti, Shriram City Union Finance Limited – MD, CEO & Non-Independent Executive Director [173]

——————————————————————————–

That’s basically — Bunty, that’s basically because, as I’ve mentioned earlier in my — our preowned 2-wheeler loans were clubbed with auto loans, which we will rectify in the next quarter. We will separate them out, the auto and the preowned. The disbursement — most of the disbursement has happened in preowned 2-wheelers. And the delinquency in the preowned 2-wheeler loans is pretty good. So that’s the reason why you have that drop off from 11.63{09c3c849cf64d23af04bfef51e68a1f749678453f0f72e4bb3c75fcb14e04d49} to 5.4{09c3c849cf64d23af04bfef51e68a1f749678453f0f72e4bb3c75fcb14e04d49} which if it is auto loans alone, there is not too much of a drop on that — there. So we will separate them out in the next quarter. Yes.

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Bunty Chawla, IDBI Capital Markets & Securities Ltd., Research Division – Research Analyst [174]

——————————————————————————–

Okay. The change of the definition kind of thing.

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Yalamati Srinivasa Chakravarti, Shriram City Union Finance Limited – MD, CEO & Non-Independent Executive Director [175]

——————————————————————————–

Exactly.

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Bunty Chawla, IDBI Capital Markets & Securities Ltd., Research Division – Research Analyst [176]

——————————————————————————–

Okay. And sir, this slide has been very likely, so it is fulfilled. So if you can share same number for the moratorium according to the product-wise, if it is possible for you?

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Yalamati Srinivasa Chakravarti, Shriram City Union Finance Limited – MD, CEO & Non-Independent Executive Director [177]

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In percentages?

——————————————————————————–

Bunty Chawla, IDBI Capital Markets & Securities Ltd., Research Division – Research Analyst [178]

——————————————————————————–

Yes, in percentages.

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Yalamati Srinivasa Chakravarti, Shriram City Union Finance Limited – MD, CEO & Non-Independent Executive Director [179]

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Yes, see moratorium today, SME, about 75{09c3c849cf64d23af04bfef51e68a1f749678453f0f72e4bb3c75fcb14e04d49} of the customers are in moratorium; 2-wheeler is around 50{09c3c849cf64d23af04bfef51e68a1f749678453f0f72e4bb3c75fcb14e04d49} of the customers are in moratorium. That is as of May.

——————————————————————————–

Bunty Chawla, IDBI Capital Markets & Securities Ltd., Research Division – Research Analyst [180]

——————————————————————————–

30th May?

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Yalamati Srinivasa Chakravarti, Shriram City Union Finance Limited – MD, CEO & Non-Independent Executive Director [181]

——————————————————————————–

Sorry?

——————————————————————————–

Bunty Chawla, IDBI Capital Markets & Securities Ltd., Research Division – Research Analyst [182]

——————————————————————————–

As of 30th May, you’re saying.

——————————————————————————–

Yalamati Srinivasa Chakravarti, Shriram City Union Finance Limited – MD, CEO & Non-Independent Executive Director [183]

——————————————————————————–

Yes. Yes.

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Operator [184]

——————————————————————————–

Due to time constraints, I now hand the conference over to Mr. Nischint Chawathe for closing comments. I would request the management to please give any closing comments.

——————————————————————————–

Yalamati Srinivasa Chakravarti, Shriram City Union Finance Limited – MD, CEO & Non-Independent Executive Director [185]

——————————————————————————–

I — one thing is we feel confident that our concerns, particularly in the SME — SME should be able to cope up with the stress and should be able to come back to normal in a couple of months.

As I said, we have very little exposure to manufacturers — manufacturing, and that may take a little more time because there are different factors there. One factor specifically is that the some of these businesses are dependent on the migrant labor, so it depends on the migrant labor moving back or their ability to find the labor.

Otherwise, I think this has given us a good — this COVID has given us a good perspective on how to handle stress in the sense positively and it’s also given us an opportunity to rediscover ourselves and push our customers onto our digital platform for payments.

In fact, even in May — as I’ve mentioned earlier, even in May, we had close to 400,000 customers, again, coming back and paying us money through a digital route, which used to be around 35,000, 40,000 on an average per month earlier. So that’s one good positive that has happened on this.

One more factor I would like to tell you is that compared to April, we have — 240,000 customers have paid — more customers have paid in May, which I feel is a positive sign. And as I said, June collections were also better than May. So we hope to get back to our normal levels of collections pretty soon.

And as I said, disbursement, gold and 2-wheeler, we should be — in another couple of months, we should be able to get back to our normal disbursement levels. SME, we will start in June, probably by end of — by September, October, we should be able to get back to our disbursement — normal regular disbursement levels. And that’s it.

Thank you, gentlemen, for joining us today.

——————————————————————————–

Operator [186]

——————————————————————————–

Thank you. On behalf of Kotak Securities, that concludes this conference. Thank you for joining us, and you may now disconnect your lines.

——————————————————————————–

Yalamati Srinivasa Chakravarti, Shriram City Union Finance Limited – MD, CEO & Non-Independent Executive Director [187]

——————————————————————————–

Thank you.