'Shriram needs to shift to insurance'

Shriram Finance had a loan book of ₹2.2 lakh cr at the end of the second quarter

- Gopika Gopakumar

The Shriram Group will need to shift its focus from its mainstay lending business to insurance amid tighter regulation and rising competition from banks, said R. Thyagarajan, who founded the financial conglomerate as a chit fund nearly half a century ago.

Thyagarajan’s prognosis isn’t uniformly shared across the group, though. While Umesh Revankar, vice-chairman of Shriram Finance, said lending and insurance businesses will have to co-exist, S. Natarajan, a member of the Shriram Ownership Trust (SOT) said the group’s views may be different from that of the founder.

While group flagship Shriram Finance had a loan book of ₹2.02 trillion at the end of the second quarter, its two insurance businesses had combined assets under management of only ₹21,756 crore.

"(If) I’m looking at a 10-year scenario, diversification into other financial services (is imperative). In the next 10 years, more bank funding will come into the commercial vehicle (CV) financing segment and NBFCs’ CV business will come down. Banks will provide 80% of the credit requirement of the industry, and NBFCs will be down to 20%. In the next 15 years, it will further come down to 5%. We should focus on diversified enterprises as they will become important for us," Thyagarajan, 86, said in an interview.