Category
🗞
NewsTranscript
00:00Hello and welcome. You're watching NDTV Profit. I'm Harsh Saita. We're in the thick of earnings
00:04and we'll kickstart at least this one with Shrikant Gopalakrishnan, who's the CFO at
00:12Five Star Business Finance and NBFC, which is growing at a breakneck speed. So let me
00:18start off with growth, Mr. Gopalakrishnan. First off, welcome. On the growth front, you've
00:25grown 35% plus and you do that consistently. At least the last two years that I've been
00:32looking and tracking your company, you've been doing that consistently. Just talk to
00:36us about the sustainability of that because the base keeps getting higher now. You're
00:41at 10,000 crore plus in terms of AUM. Where does it go from here?
00:46So first of all, thank you, Harsh. Thank you for having me on this show. In today's scenario,
00:52I don't know if breakneck speed is the right word or is something that's not very advisable
00:59to use. But having said that, what we generally maintain is that there is a huge market for
01:05the kind of lending that we do. If your viewers are aware, we are an NBFC who lend to small
01:13business customers and self-employed individuals who are otherwise cut off from the formal
01:17financing ecosystem. So this market in our country is very large. The only other option
01:24that they have is borrowing from the unorganized ecosystem. So if we are able to give them
01:29the benefit of better interest rates, ability to amortize the loan over equated monthly
01:34installments and ensure that you have the right practices in terms of business collections,
01:41they are very interested in coming to the formal ecosystem. And as a company, we have
01:45developed a proprietary underwriting model to evaluate the cash flows of these customers,
01:50understand their character, which signifies the intent of them to repay, and also take
01:54a collateral which acts as a security in bad times. So with all of these things, I think
01:59the market is really huge. We have been growing, like you said, at 35% over the last two to
02:05three years. The guidance that we are giving to the market today is that we would want
02:09to grow at 30% plus for the next two to three years. It's not because of the demand or it's
02:17not because of any issue that we are foreseeing, but generally what we hear from regulators
02:23in the market is that there is some bit of overheating that is probably happening in
02:27the market. And as a very conservative company, we want to stay true to our principles, which
02:33is why we are looking at 30% plus growth. And even at the base of, let's say today we
02:38close June with about 10,300 crores of AUM, even if this goes to, let us say, 14,000 crores
02:44or 17,000 crores in the next couple of years, even at that point, I think our ability to
02:49grow at 30% plus is not in doubt at all. Like I said, we have the market, we have the infrastructure,
02:56we have the underwriting model, so we don't really see growth as a challenge. And when
03:00this overheating probably subsides a little bit, we can also take a relook at our growth
03:06numbers. But I think growing at 30% plus, which is the guidance that we are giving to
03:10the market, is not going to be a problem at all for the next two to three years.
03:13Right. So even where the system growths were to slow down, Mr. Gopalakrishnan, where you'd
03:21see system growth currently at 15, you're growing at roughly double of that or more
03:27than double of that. If that were to slow down to just early double digit or maybe even
03:33single digit, your growth would likely not get impacted. And why is that so? What gives
03:40you that confidence if that is so? Yeah, you're right. We don't expect any
03:46slowdown irrespective of whether the economy goes up, goes down. There are systemic growth
03:53downward trends, primarily because of the fact that we lend to a segment of population
03:59whose services are very important for the common man to lead a normal life. So we don't do too
04:07much of manufacturing enterprises. We don't do logistics and all that. We actually lend
04:12monies to people who are providing essential services to the common man. Now, irrespective
04:18of whether the economy grows or does not grow, we are not going to stop drinking tea from a tea
04:23shop. We are not going to stop eating from a small eatery. We are not going to stop buying
04:27medicines from a small medical shop. Each of these services are largely insulated from economic
04:35upturns or downturns. We don't really see that the economy upturn or a downturn is actually going to
04:41positively or negatively impact us. So even if tomorrow the economy were to grow at, let's say,
04:4650, 60 percent, would we want to grow at that speed given a larger base that we may have?
04:53Probably not. And even if the economy were to get to closer to, you know, the lower two-digit
04:58numbers, like you said, will it impact our growth? We don't believe because these are essential
05:03services. You take a scenario like COVID, when the first sign of easing of lockdown was announced,
05:11the people who are allowed to open their shops, where the people who are entering essential
05:15services, the small shopkeepers, so to say. So these are people who are probably affected
05:22last by an economic downturn. But at the first sign of green shoots, these are the people to
05:27emerge back and emerge back in a much stronger manner. So given that kind of a lending profile
05:34that we have, we don't really see any challenges that will be posed to us by the economic upturns
05:38or downturns.