Business Management

Thriving On:Umesh Revankar

Behind the wheels of loud, multi-hued trucks--that invariably sport words of wise men--sit small truck owners that rule over Indian roads. As many as 80 percent of trucks running in the country are pre-owned or bought by these small truck owners. And there's a good chance that a majority of this 80 percent are happy customers of Shriram Transport Finance Company (STFC).

Under the aegis of its Director Umesh Revankar, the company is focused on strengthening relationships with customers and banks, managing loans better, and disbursing loans on time.

CIO: You started your career with STFC in 1987. What are some of the key transformations you have seen at the company?

Umesh Revankar:

Well, back then, we were like any other finance company or private money lender. Most of the loans we disbursed were based on the assets we were financing. For instance, depending on the value of a particular truck, loan would be sanctioned. But it wasn't about maintaining a customer track record or building a relationship with them.

Today, our business model has transformed from just asset-based to relationship-based and now, to an information-based one. So there's been a big change in the way we finance our customers. We recognized the need for a relationship-based model and that's why, apart from our core business, we also offer services like life insurance, vehicle repair, change of tire, and aid in case of accidents.

The information-based model has enabled us to leverage technology and settle claims quickly. Five years back, claims were settled in 7-8 months but now they are settled in just 40 days.

There was also a need to build relationships with banks and reduce dependence on retail funding. Fifteen years back, the RBI tried to restrict the public deposit raising ability of NBFCs. And, bank funding to NBFCs was not available. We were dependent on retail funding. Hence, slowly we started building relationships with Citibank and UTI. We securitized our portfolio with banks. As their experience became better, more and more banks started buying out portfolio through securitization (pooling various types of contractual debt such as residential mortgages, commercial mortgages, auto loans or credit card debt obligations and selling this consolidated debt as bonds to various investors).

This brought banks into the picture. Formerly, 90 percent of our assets used to come from retail. At present, while 22 percent of our income comes from retail, 78 percent comes from institutions, banks and mutual funds. This has been a huge transformation. Since 2001, STFC not only raised its liability, but it established partnership with more than 65 banks.

CIO: You took over as MD just eight months back. What's it been like?

Umesh Revankar:

There were a lot of challenges when I took over. The NBFC sector was going through a transition and the RBI had revealed new securitization regulations. According to the new guidelines, assets should conform to a maximum interest rate of eight percent above the bank's base rate for it to receive priority sector status. This questioned our ability to grow.

But, the good news is that despite the competition from banks--which investors fear would reduce our growth--we are still going strong. We are undisputed in the space of used-vehicle financing. While new-vehicle financing has faced stiff competition from banks in the past, we still haven't given up our market share. We don't believe in buying market share. We would rather upgrade our used-vehicle finance customers to become new-vehicle finance customers. We have also extended our business to financing passenger commercial vehicles, multi-utility vehicles, three wheelers, tractors, and construction equipment.

At Shriram, we have been able to adjust to fresh demands, nuances of environment and RBI regulations, and our performance has been consistently outstanding.

CIO: And would you have achieved that without IT?

Umesh Revankar:

If not for technology, we would have exhibited an impression of being a mom and pop store to banks. Also, we would have achieved only one-fifth of our present magnitude. Technology has helped us manage loan books better. It ensures timeliness in sending information (monthly reports, portfolio behavior, and performance ratio) demanded by banks.

In the last 15 years, we have built everything in-house. We never outsourced anything. We never believed in buying software because we felt it was very expensive. We chose .Net technology--because it's more flexible--when other NBFCs and banks preferred Oracle. Our team of 270 people has been very successful in delivering products internally. This includes the hardware team which is spread across 513 branch offices. When we started seven years back, STFC had assets under management (AUM) of Rs 5,000 crore, today, it is the largest asset financing NBFC in India with AUM worth Rs 45,000 crore. We have also increased our IT spending which was miniscule in the beginning.

CIO: What are two of the big business challenges that your industry is facing?

Umesh Revankar:

There are two big business challenges in our industry. One, it's the financial inclusion of people who have not been formally part of a banking system. A lot of our customers are in the business of cash-and-carry. They suffer from a disadvantage. Therefore, building a financial discipline is one big challenge.The second challenge is communication with our customers. The only medium of communication is oral which may not be the most effective way of conveying the right information. At STFC, our field officer is the official representative who talks to the customer. If our customers don't comprehend our products and services, we would lose business. We need to bridge this communication gap.

CIO: Can IT help beat those problems? How?

Umesh Revankar:

Yes, IT's certainly going to be of great assistance. It's already starting to help. In the last 12 months, we have setup call centers to provide information about our product and services to our customers in local languages.

Since the communication from our field officers may not be sufficient, we have initiated SMS-based communication in local languages, filling in customers about their periodic payments, advising them on repayment charts, and introducing new products and services. We will only be able to ensure full communication when STFC launches a query-based application on mobile phones.

CIO: Going forward, how is STFC's IT strategy designed to increase its efficiency?

Umesh Revankar:

At STFC, we calculate efficiency on the basis of the number of customers a field officer can manage and serve. Fifteen years back, the ratio was 1:75. Today, the ratio has become 1:150. This only means that our ability to service a customer has also doubled. We are hoping to extend this ratio to 1:200 in the next two years. We are creating usable dashboards which will assist 8,000 officers on the field to increase their efficiency. This also helps us improve our relationship with over 900,000 individual customers (1.8 million user accounts).

- See more at: http://www.cio.in/ceo-interviews/thriving#sthash.jC1xW4ZL.dpuf


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