Discussions surrounding the merger of Shriram City Union Finance and Shriram Transport Finance have spanned several stages over the past five to six years. Our primary objective was to ensure that the synergy resulting from the merger serves a clear purpose for the company and holds meaningful benefits for all stakeholders involved. To achieve this, we have carefully considered various events that have unfolded over the years.

One significant event was the failure of a large non-banking finance company (NBFC) a year before the Covid pandemic, which subsequently cast a shadow over the entire NBFC industry. The combination of these events made the idea of a merger seemingly out of question at the time. However, as the Covid situation improved and the economy began to show signs of recovery, it presented an opportune moment for our stakeholders to embrace changes. We recognised the potential of creating a unified company with branches offering a comprehensive range of products, thereby addressing the cyclicality concerns frequently raised by investors and fostering accelerated growth for the smaller entity. This approach also provided customers with a single, convenient location for their financing needs.

Additionally, within the Shriram Group, we possess life and general insurance businesses. Selling these protection products requires persuasive techniques due to their non-discretionary nature, and the merger became advantageous. We gained access to a larger pool of customer data, enabling us not only to cross-sell and upsell, but also customise products based on specific requirements which was not feasible as independent entities.

Furthermore, the merger facilitated our venture into developing a super app, poised to deliver a seamless digital experience to customers.

Exposure limits

Initially, we had concerns regarding our lenders, primarily due to potential exposure limits in certain banks. However, a thorough study of various banks and mutual funds revealed that sector-wise exposure limits posed no constraints, as there was ample room for growth, with banks projected to expand 15-20 per cent. Consequently, aligning our growth trajectory with that of banks mitigated concerns of reaching any imposed ceilings. Lenders have responded positively to the merger, appreciating the fact that we have transformed into a multi-product company, ensuring a continuous flow of revenue and maintaining good average asset quality.

This has also garnered support and appreciation from our shareholders. We have engaged in discussions with rating agencies, and they, too, have expressed reasonable comfort with our multi-product strategy, recognising its ability to reduce risks associated with specific segments or areas of the economy.

No comfort zone

Among the various challenges, employee integration proved to be the most formidable, as they often prefer to operate within comfort zones. Before the merger, both companies had leaders situated across different regions, who were accustomed to working within their respective environments. The merger disrupted this comfort zone.

Nevertheless, when we consider the Shriram DNA, we find remarkable similarities in functions, processes, and HR policies between the two entities. This alignment, coupled with a significant portion of our customer base consisting of business people, has facilitated a smooth transition to the new environment for employees. Extensive collaboration through combined workshops and training sessions before the merger enabled us to seamlessly merge operations, resulting in the successful completion of employee integration.

Banking on super app

We eagerly anticipate the launch of the super app. This change promises to have a profoundly positive impact on both our employees and customers. While revenue growth may not be the immediate outcome, the quality of our service will experience a substantial improvement.

The writer is the Executive Vice-Chairman of Shriram Finance