Shriram Finance said it is sticking to its plan to expand gold lending, even as analysts pressed it on rising stage 2 and stage 3 assets in the segment, which management attributed to customers adjusting to a new repayment format.
On the second-quarter earnings call, Executive Vice Chairman Umesh Revankar said there was no change to the plan. Aditya Tiwari of Emkay Research had cited the company’s earlier target of doubling the gold book over three years, from about 2.5% to 5% of total assets.
Analysts Press On Asset Quality
Abhishek Murarka of HSBC noted that stage 2 and stage 3 gold assets had risen sharply quarter-on-quarter for three quarters. He put the gold book at about Rs 9,000 crore, which Revankar confirmed.
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Tiwari pointed to instances of multiple borrowing against gold, and said some banks had deliberately moderated their gold loan growth.
The gold book is about Rs 9,000 crore, according to the call.
Revankar said the company sees no challenge as long as customers are identified carefully and gold is valued properly. He declined to speak for the industry, saying Shriram’s portfolio is small, but called the opportunity very large.
Management Blames Repayment Format
Revankar said the rise stems from the EMI and interest-servicing gold loans Shriram has introduced. Borrowers are used to bullet repayment, he said, and have not been servicing on time.
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Those opting for EMI or interest payments can get a larger loan, and the company is stepping up customer communication to normalise behaviour.
Murarka asked why delays were not arrested before reaching 90 days. Revankar said Shriram can sell the gold, adding that it has no credit cost in gold loans.
Managing Director and CEO Parag Sharma, responding to Anuj Shah of 3P Investment Managers, said gold disbursements were Rs 5,443 crore, against Rs 5,153 crore in the previous quarter.
He put loan-to-value on the book, including accrued interest, at around 72-73%, little changed from last quarter.
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Farakh, the company’s operational performance lead, said profit after tax rose 59.37% to Rs 3,677 crore, and assets under management grew 16.96% to Rs 3,29,003 crore. He said gross stage 3 was 4.65%, against 4.57% a year ago, while credit cost on assets rose to 2.03% from 1.68%.
Revankar said growth would be 15-17% this year, against the initial guidance of 18%, citing the West Asia war and a weak monsoon that ended at 87% of the long period average. He said credit cost could run 30-40 basis points above the 2% guidance for a quarter or two, with Maharashtra, Karnataka and Telangana the hardest hit.
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