The first quarter of 2020-21 was a washout. More than the business challenges, what had bothered him the most was the impact of the pandemic on the health of employees and customers. The pandemic reinforced the importance of connecting with people. It puts people on top of everything else. “People are your best assets and here was an opportunity for us to show it in action when it really mattered,” he puts it matter-of-factly.

The second six months was all about holding fort and maintaining status quo, as one did not have any clue as to how the external environment would pan out. He did not want to do anything dramatic. “To a large extent, the moratorium we offered to customers who were interested and eligible reduced the burden on them,” he adds. “Asset quality did not deteriorate thanks to the moratorium”.

By March 2021, SHFL was coming back on the recovery path. The final quarter of 2020-21 was beginning to look good when the second wave of Covid struck. Unlike the first wave, which lasted long and had more of an economic impact, the second one was shorter but had a devastating effect on the health care side. “It was lethal,” Lakshminarayanan reminisces. “Customers had a major health care impact that affected their livelihood. We worked well with them on restructuring their loans”. Indeed, his initial phase as MD was a turbulent one, especially from a health care point of view.

On growth orbit

It is over 30 months now since he took over as the MD of Sundaram Home Finance from Srinivas Acharya, who had spent close to four decades with the group. After seeing through two years of rather tough times, Lakshminarayanan is set on putting SHFL into a higher growth orbit.  His confidence must be read in the context of solid growth numbers that the company has reported after two waves of Covid in 2020 and 2021. 

Proof of the pudding is in the eating, it is often said. If proofs were required, it could be found in the latest numbers. In the first-half ended 30 September 2022, SHFL disbursed over Rs1,700 crore, a record high in many years.  The assets under management too have crossed Rs10,000 crore. Not surprisingly, SHFL has witnessed stepped-up activities on the fund-raising and hiring fronts.

From a business point of view, the recovery and the rebound in the real estate sector has been a big positive. “We thought that the recovery would be slow and gradual but the pace of the revival took me by surprise,” he explains. “The nine months after Wave Two in 2021-22 showed that confidence levels of the customers were back. We saw investment in residential property across segments and geographies. The sector has been resilient in terms of recovery. This has taken us by surprise”. The growth story appears to be broad-based, and the momentum is being driven by a secular recovery.

Bold foray

So much so, it has emboldened this usually a conservative home finance company to venture into hitherto unexplored terrain. In a first in over two-decade history of the company, SHFL has just announced a foray into a territory that it did not seek to venture into in the past. Setting its eyes firmly on newer business opportunities, the company has opened up its doors for tiny traders, shop owners and small entrepreneurs with small business loans of up to Rs20 lakh.

This has taken many long-time watchers of this group by surprise. None would have imagined this traditional firm taking this call in the years gone by! In the very first month of its new offerings, the company has opened three branches in south Tamil Nadu, and is looking to open many more in Tiers III and IV towns.

During the pandemic, Lakshminaryanan took a strategic call to move away from larger cities into Tiers II and III towns for home loan disbursements. Perhaps, that has helped the company achieve record disbursements this year. Not surprisingly, there has been a significant shift in the disbursement-mix between cities and Tiers II and III towns for the company since the time he took over the mantle as MD.

“If you want to expand your presence in the self-employed segment, you need to understand the customers inside out,” Lakshminarayan informs. “With our existing customer base and the group’s differentiated model of being close to customers, we decided to expand our presence in the Tiers II and III towns”. According to him, 65 per cent of the incremental business of SHFL is now coming in from Tiers II and III towns.

When Lakshminarayanan had worked for multinational financial institutions, it was unlikely that he would have ever imagined leading a home finance company belonging to one of the most traditional business groups, known for its conservative approach. His stint in MNCs apparently has helped him to look at newer areas of opportunities with a sense of openness.

Distributed disbursals

To be sure, there is a calibrated approach to business growth. The focus appears to be on distributed disbursal. For one, it helps SHFL to expand its geographical footprint. For another, it also helps the company in risk mitigation.

“We are looking good on a number of parameters and there is certain buoyancy in the market place,” he affirms. “The long-term trajectory for housing finance looks solid. Home as an asset is not going to go down. The overall outlook is positive as we see real end-user demand”. Heading a company of the traditional kind such as SHFL, Lakshminarayanan is well aware of his larger responsibility.

“You do not want to be a cowboy here. But, at the same time, you do want to grow the business. To me, it has to be a consistent and sustainable growth in the long-run,” he makes it clear. Retaining the traditional tag and navigating the contemporary commerce world is a unique art. Lakshminarayanan understands this, no doubt.

A small step for a big leap

Why stray into the small business loan segment? -- because, it offers an emerging opportunity. In the light of the revival in businesses after the pandemic, the self-employed businesses, traders, grocery shop owners, pharmacists, hardware shops, tea shops and the like in smaller towns are now looking for working capital loans to expand their business.

SHFL did test marketing in Madurai, Tirunelveli and Salem and received positive feedback from this segment. That has led SHFL to make a strategic diversification into the small business loans segment. The customers in this segment may not have the typical documentation that those in the home loan segment would have and, hence, this calls for an in-depth understanding of the customers and their businesses.

“We believe that the ‘Sundaram experience’ will come in handy here as our focus has always been on understanding the customer needs and providing the best customer service,” says the MD. In the first month of its foray into this segment, SHFL has opened exclusive branches in Madurai, Tenkasi and Theni in south Tamil Nadu.

Plans are afoot to open seven more exclusive small business loans offices in Tier III and IV towns in TN by March 2023. It is aiming to disburse around Rs15 crore from this segment by the financial year end.  A dedicated team is in place to tap into this opportunity. The company will be hiring 50 people specifically for this segment over the next six months.