Shriram City Union Finance -Specialises in retail finance:: Macquarie Research,

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Shriram City Union Finance
Specialises in retail finance
Event
 Shriram City Union Finance is part of the Chennai-based Shriram Group. As a
deposit-accepting non-banking financial company the company specializes in
retail finance.

Impact
 Primarily based in South India. SCUF operates through 650 branches, 350
of which are located in the two south Indian states of Andhra Pradesh and
Tamil Nadu. Of SCUF’s 650 centres, 450 belong to the group’s chit fund
subsidiary, Shriram Chits. SCUF uses the chit fund infrastructure, along with
its 7,000 strong employee force, to originate and collect loans. In turn, SCUF
shares a fee proportionate to the assets sourced to provide these services.
On its own payroll, SCUF employs 2,000 staff, who primarily include
managerial talent.
 Strong loan growth. SCUF has grown at a robust pace of 55% in the past
four years. Loans for motor vehicles and gold have been a key driver
comprising 53% of the total portfolio. SME lending represents 22% of total
loans while personal loans account for another 10%. The company has a
leverage of 5.7x
 PAT CAGR of 57%. The company has grown PAT at a CAGR of 57% over
FY06-10. The company’s NIM was around 12% for FY10.
 Asset quality has improved. Gross NPAs have come down to 1.79% from
2.43% a year ago. NPL coverage has improved to 76% from 64% in 3Q10.
 Liabilities - predominantly bank borrowings. Bank borrowings comprise
55% of total borrowings including 30% term loans and 25% cash credit. The
company also has CPs amounting to 4% of borrowings and 32% of CD.
Outlook
 The stock currently trades at 1.7x FY12E BVPS as per Bloomberg
consensus..


Shriram City Union Finance Aide Memoire
1. What is your target customer base?
2. How do you manage credit quality?
3. How much of your loan book is Andhra based? What is the average interest you charge on your various categories of
loans including gold loan? Do you see the recent Andhra Ordinance on MFIs also impacting you given your high margins?
4. How much impact on your cost of funds would be due to the recent RBI directive to take away priority sector status to gold
loans from NBFCs?
5. How has the wholesale funding cost moved in the last six months?
6. What is your outlook on the liquidity tightness? Do you think it will ease in the next 2-3 months?
7. What are the incremental spreads you are making on loans?