Godrej Capital to close FY24 at Rs 12,000 cr loan book: CEO Manish Shah

It has been a sunny quarter for the financial services arm of Godrej Industries - Godrej Capital, which completed the three-year milestone last week. The holding company for Godrej Housing Finance and Godrej Finance, which hit break-even point in the April-June period, turned profitable this quarter, company managing director and chief executive Manish Shah, told DH’s Shakshi Jain. He also shed some light on the company’s expansion plans and fiscal targets, going forward.

Edited excerpts.

Where does your loan book stand currently and what are your targets going forward?

Currently, our overall loan book is about Rs 7,800 crores. Our first goal was to get to a Rs 10,000 crore balance sheet by March, 2024. Thankfully, we should get there in January or February, at the latest. So, we are quite confident of ending this year at close to Rs 12,000 crore. About Rs 1,400 crores of the Rs 7,800 are in Karnataka. In Karnataka, it's pretty much mostly in Bangalore, because we are only now growing. We've just started a few months ago, our presence in Mysore, Mangalore and Udupi.

We ended last year at about Rs 5,200. So, you're talking about 100%-plus growth this year.

How much of your loan book is captive?

As we got started, we only worked with the realty arm - Godrej Properties. Half of our home loan book is to customers buying homes from Godrej Properties. So, roughly, of the Rs 7,800 crore book that we have, about Rs 3,800 is the home loan book. Roughly half of that - about Rs 2,000 crore, is to customers of Godrej Properties. So roughly 25% comes from within the ecosystem and 75% from outside.

Elaborate on your expansion plans with respect to physical branches.

We are currently in 30 locations with roughly a little over 50 branches. We're looking to take these 30 locations to 60 in the next year, and then 100 the year after. We're still figuring out exactly how many branches per location, but if you stick with the current ratio, we'd have between 125-150 over the next two and a half years.

What is the breakup of secured versus unsecured loans, and what is your current net interest margin?

The unsecured business is actually our newest business. We started it only this financial year, so it's just about five or six months old. We have a roughly Rs 400 crore loan book on the unsecured side. But when we envision our next three to five years, what we hope to get as a mix overall, is 60% focus on small business and 40% on housing. So, over the next two years, we look to get to a book of Rs 30,000 crore and Rs 50,000 crore by FY28. We aim to get a mix of 80% secured and 20% unsecured. We believe that's a healthy mix.

As for net interest margin, our average spreads would be between 4-6 per cent (currently).

Are you looking to mobilise funds in the near future?

We envisaged that over the next four and a half years or so, we broadly need about Rs 4,000-4,500 crore of equity capital. Half of that has already come. Originally Rs 1,500 crore was committed, then another Rs 1,200 crore was committed for this year. Each year, we go back to the group with a plan for the coming years. Over the next two years, we roughly need about Rs 1,500 to Rs 2,000 crore of capital. The group has the first choice to invest, bring in the equity capital or ask us to look outside for a strategic investor. As of now, it does not look like we will require an external investor. The rest of the capital, whether it's tier II or debt capital is something that we have access to in financial institutions. So that will always continue. Today, for example, out of our nearly Rs 8,000 crore book, we have roughly Rs 6,000 crore borrowing and Rs 2,000 crore equity.