With the market getting crowded with wholesale asset reconstruction companies or ARCs, financial services conglomerate Shriram Group's decision to focus on retail ARC is seen as a foray at the "right time," said a top official.
The Shriram group recently announced its entry into retail asset restructuring (ARC) and also into digital wealth management service businesses.
"My personal view is that retail ARC is a good business to get into at this point which Umesh (Revankar) has been reiterating that in retail ARC there is nobody in this sector," Shriram General Insurance's Vice-Chairman Jasmit Singh Gujral told PTI recently.
He is also part of the four-member board of management (BOM) of Shriram Ownership Trust, which oversees the activities of the group. The other three being DV Ravi, VC & MD of Shriram Capital, Umesh Revankar, Executive VC of Shriram Finance and R Duruvasan, director at Shriram Life.
Elaborating, Gujral said there is a synergy across businesses of the Shriram Group, and whether life or general insurance in the last 15-18 years of time, both have been making money every year.
Asked whether too many products were on his plate, Gujral denied saying, "No. it is not really. Let me put this way for you, minus a bank, what is missing? When you go to a bank, you can get gold loans, business loans, and housing loans.
"If you have acquired a customer, you might need a loan product at some stage of time or maybe your son wants an education loan or a personal loan. You are building an entire bouquet of services for a customer, keeping him in the center. It is not that every customer requires everything, but then chances are bright that he may go out to another provider if we don’t offer him that," he explained.
"What I am trying to say is that I have deposits, I have got loans, housing loans, education loans. If you need life insurance and if you have a scooter, I can give you both (life and motor) insurance. Within the company, there are many products. Retail ARC or anything which has got financial in nature, why should we not have it, wealth management services, why should we not have it?" he said.
On whether entering the banking sector was on the radar for Shriram Group, Gujral said "no, nothing on the horizon now."
Retail ARCs are businesses which will buy stressed retail assets from lenders and reconstruct and rework on the stressed asset and make it monetizable. "The pricing of the stressed asset is the key to success in that business," said Umesh Revankar.
Recently, Shriram Group said it has applied to the Reserve Bank of India on its proposal to launch a retail ARC (asset reconstruction) business and is waiting for approval from the regulator.
Shriram Capital is the holding company, and is investing Rs 300 crore directly into the new venture.
Revankar said there is a huge scope for making a margin in this business with a ticket size of Rs 5 to Rs 20 lakh. "We feel that we can bargain and can get a better rate since there are no players in the small ticket size range," he said.
To a query, he said initially the company would focus the retail ARC business in Southern markets and later would expand to other parts of the country.
"Initially, we will launch in Tamil Nadu and the other southern states where we have enough expertise and then we will launch it all over India," he added.