Non-banking financier Shriram City Union Finance (SCUF) today said it expects its margin to fall marginally to around 11 per cent this fiscal on cost pressure.
“We should be able to hold the margins at 10.5-11 per cent levels,” the Chennai-based Shriram Group firm Managing Director G S Sundararajan said over phone.
He said even though the overall rates scenario is softening, which typically helps margins, it’s a different scenario for his company as half its funding needs are sourced at a fixed rate while remaining are on floating rate basis.
The company, which declared a 33.1 per cent rise in the March quarter post-tax profit at Rs 125.61 crore, had reported a widening in the net interest margin to 11.45 per cent as against 10.97 per cent a year ago.
The company will put extra focus on micro and small enterprises loans this fiscal and is comfortable holding the gold loan component to the current 30 per cent mark, he said.
He attributed the rise in gross non-performing assets ratio to 2.19 per cent from the 1.55 per cent a year ago to a dip in the gold loan book, which has the lowest delinquencies.
“From last September onwards, we felt the prices of gold might correct and hence took action like lowering the loan to value ratio for gold loans, which resulted in the fall in gold loan composition,” Sundararajan said, adding that the proportion came down from a high of 42 per cent.
The decline in the proportion of gold loans alone had a 0.60 per cent drag on the gross non-performing assets ratio.
As the proportion of lending to non-gold segments like two-wheelers and small businesses was growing, it helped the margins considerably, he explained.
Its total income for FY13 on a consolidated basis had stood at Rs 3,081.20 crore as against the Rs 2,037.83 crore, while Sundararajan today said it is targeting the topline to grow by 35 per cent.
The company’s stock today settled 0.92 per cent higher at Rs 1,117.95 apiece on the BSE.