Have you started operations in any part of the country after April 20?
As of today we have completely shut down in Tamil Nadu, Maharashtra, Karnataka and Kerala. In Andhra, we were able to open partially, because you are not allowed to operate in red zones. We have asked 25 per cent of our employees to report to office in green zones, but there is the problem of arbitrariness and the local law enforcement can ask us to close the branch. We will get more clarity in a week's time.
When do you expect disbursements to happen?
If we are able to open branches in May, I expect gold loans to pick up. If two-wheeler dealers are open, some disbursements in that space may also happen. But business loans are likely to pick up only in June. There are enquiries from customers to fund their gap in working capital, but it will take time since I may need to understand how badly their business is going to be impacted and what cash flows they can generate. We are not in a hurry to start lending in May.
What would the impact of Covid-19 be in FY20 and FY21?
FY20 would not be affected much because of this. But this entire financial year we will see pain. I have 57 per cent of SME loans and 21 per cent of two-wheeler loans, around 10 per cent of gold loans apart from others. Almost 80 per cent of my SME customers are traders or service providers. In the short term, my gross NPAs may be elevated, but in the long term, we will be able to pull them back. If the business starts functioning in June, it would take six to nine months from then for me to come back to my normal numbers in delinquencies. Most of the businesses can get back to 70-80 per cent of efficiency within nine months of the lockdown being lifted.
What are the learnings for you from Covid-19?
The silver lining is that so many people are paying through digital, so this is the model I want to push post the lockdown, as it may help me reduce my collection cost. It is a also a learning for our future branch expansions.
What are your fund raising plans?
We have sent our applications across our TLTRO, and are waiting for the bank's reaction. Banks are expected to discuss after the lockdown is liftd. We were looking at an MTN issue with a board approval to raise $1 billion. But we may have to wait for now. The Small Industries Development Bank of India (Sidbi) has said NBFCs and microfinance lenders can borrow money from it for onward lending to MSMEs. The borrowing has to be repaid within 90 days, which is not viable to financial institutions.
Shriram Capital has been looking for a three-way merger. What is the current status?
The holding company is working on various permutations and combinations. I think it has been kept on hold due to the prevailing situation. Once things become normal they may initiate, I think.