Shriram Finance to Expand Gold Loan Portfolio and Launch Dedicated Branches

Shriram Finance, a leading vehicle lending institution, is strategically planning to bolster its gold loan business as part of a broader effort to diversify its asset base. Executive Vice-Chairman Umesh Revankar stated the company will focus on increasing its activities in gold loans, potentially establishing specialized gold loan branches. Currently, gold loans represent a small fraction, just 2%, of the company's overall Assets Under Management (AUM), which reached ₹2.81 lakh crore in the second quarter, showing a 16% year-on-year increase. The dominant segments remain commercial vehicles (46% of AUM) and passenger vehicles (21% of AUM).

Revankar also provided an optimistic outlook on loan growth, anticipating it to be better in the second half of the fiscal year compared to the first. While maintaining a guidance of 15% growth for the current fiscal year, the company expects actual growth to be closer to 17-18%. Shareholders have approved an enhancement of the borrowing limit to ₹2.95 lakh crore, alongside additional limits for securitization, providing financial flexibility.

Impact: The strategic push into gold loans aims to reduce Shriram Finance's reliance on the volatile vehicle financing sector, potentially enhancing its overall risk profile and opening new revenue streams. A successful expansion in this segment could lead to improved net interest margins and broader market reach. The company also anticipates its net interest margin to rise to 8.5% by the end of FY26 and maintain credit costs below 2%.

Difficult Terms: NBFC (Non-Banking Financial Company): A financial institution that provides banking-like services but does not hold a full banking license. They can offer loans and other financial products. AUM (Assets Under Management): The total market value of the investments that a financial institution manages on behalf of its clients. YoY (Year-on-Year): A comparison of a value from one period to the same period in the previous year. FY (Fiscal Year): A 12-month period that a company or government uses for accounting purposes. AGM (Annual General Meeting): A mandatory annual meeting for shareholders of a public company. GST (Goods and Services Tax): An indirect tax levied on the supply of goods and services. Repo Rate: The rate at which the central bank (like the RBI) lends money to commercial banks. Net Interest Margin (NIM): A measure of profitability that indicates the difference between the interest income generated by a financial institution and the interest paid out to its lenders, relative to the earning assets. Credit Cost: The amount of money a financial institution loses due to loans that are not repaid.