Shriram City Union Finance to raise Rs 325 crore via institutional placement

Shriram City Union Finance (SCUF) may raise around Rs 325 crore capital through either an institutional placement of shares or from private equity investors this fiscal, a top official has said.

"It depends on how much the market can bear. Rs 750 crore is what we need. I am sure we will do more than half of that this year," managing director GS Sundararajan told PTI.

The Chennai-based company will opt either for a qualified institutional placement (QIP) or a stake sale to a private equity player for raising the capital, he added.

The company already has a shareholder approval to raise Rs 1,000 crore through various routes.

Mr Sundararajan said the company does not have an immediate need for capital and it will need Rs 750 crore in the second half of the next fiscal year.

However, depending on the market conditions, it will take a call on raising the capital, he said. "Over the next 6-9 months, we will know how much of market interest is there. At that time, we will decide whether it is a QIP, it is a private equity or a combination of both."

The company, from the Shriram Capital Group, has interests in lending to micro and small businesses, two wheelers and loans against gold.

Mr Sundararajan said it will increase the share of enterprise loans to the micro and small businesses to up to 50 per cent of the book from the current 42 per cent.

He said the group, which has its genesis in the chit funds business, wants to gradually grow this share to 65 per cent in the next three-four years and would like to touch the 50 per cent mark by the end of the fiscal year.

"Our ability to understand the customer base, credit worthiness and cash flows is very high," he said, pointing to the strengths of the company in this line of secured lending.

Additionally, the chit fund business genesis, ability to understand surrogates and show more tolerance also help, he said.

The enterprise loans have been increasing at the expense of a reduction in the share of gold loans, which have now come to around 30 per cent from a peak of 42 per cent last October.

The company will not grow the gold loans as percentage of the overall pie, but will grow the volumes, Mr Sundararajan said, adding the dip in the share of gold loans came after the company reduced its loan to value ratios, sensing a fall in prices of the precious metal.

Welcoming the recent dip in gold prices, he said, "its a great business to do, it is very profitable as long as you can manage the LTVs, make corrections as and when you need to. You should never believe gold prices will go only one way."

The company will try and stabilise the proportion of gold loans in the 25 to 30 per cent range, he said.

When asked about the group's plans to enter the banking fray, he confirmed that the company continues being interested but declined to comment further saying that it is awaiting the clarifications which the Reserve Bank will be coming out with.