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Assets under management of over Rs 80,000 crore, market share of 25 per cent in pre-owned commercial vehicles, large customer base in excess of 11 lakh, employee strength of 16,290, an extensive distribution network of 719 branch offices and 672 rural centres, an unbroken record of growth of over 35 years, Shriram Transport Finance Corporation (STFC), part of Shriram Capital Ltd., is the most shining example of the evolution of a finance services company.

At the base of the success lies the ability of the promoters to draw out the innate burning desire of truck operators to emerge entrepreneurs, effectively leveraging the rich propensity for savings and investment.

R Thyagarajan (RT), Founder - Chairman and principal architect of the strident growth of the Shriram Group, pointed to the environment in Tamil Nadu as favourable for financial services: “the state has witnessed the evolution and growth of regional banks– Bank of Madura, City Union Bank, Karur Vysya Bank, Lakshmi Vilas Bank and the Tamil Nadu Mercantile Bank. These evolved as strong commercial banks effectively meeting the credit requirements of a large number of local businesses. Of these, Bank of Madura merged with the ICICI Bank: but the other four grew in size, reach and effectiveness. These banks mobilised the savings of the community around and employed these profitably to meet a variety of needs of large number of enterprises spread around the banks’ operational areas,” said RT.  


An environment of savings and enterprise

The culture of saving and investment also helped in the evolution of non-banking financial institutions. RT pointed to Sundaram Finance emerging as a pioneer in this area that extended finances to a large number of customers not effectively serviced by banks. The strengths of the TVS Group in road transport operations, for both passengers and freight, that extended to vehicle distribution, bodybuilding, tyre retreading and spare parts, helped in a logical expansion into vehicle financing.

“This success was quickly followed by Sakthi Finance and Shriram Transport Finance in Tamil Nadu and ICDS in Karnataka. During the 1980s and 1990s, these finance companies helped thousands of individuals to emerge as entrepreneurs owning trucks and other small enterprises. For a couple of decades, every business house diversified into the financial services! Amalgamations, unit companies of TVS, MCC, India Cements and a number of companies in Coimbatore set up such finance companies. The state also saw the emergence of leasing companies  First Leasing Co and India Equipment Leasing Co.,” pointed out RT.

Historically, the Shriram Group has been known for the chit funds business. The expertise developed in inducing thousands to save and invest in chit funds and creating a source for accessing funds through auction of chits, drew large numbers as customers. Shriram Chits handles even today around Rs. 1800 crore of business encouraging savings and providing a source for accessing needed funds. This business is spread over the southern states and Maharashtra. RT said that with the increase in costs and tougher norms,  the business is losing its attraction. Run mostly by small businesses, it also lacks the needed power to lobby. Except for a couple of well-established companies like Margadarsi Chit Funds in Andhra Pradesh and Shriram Chits, the business in an organised form, has waned. RT said the sector would continue to operate in an unorganised manner.

Shriram used the experience gained in tapping the savings of large number of households and in meeting the needs of small entrepreneurs to own trucks:  “We utilised this resilience from suffering and understanding of mobilising funds in the chits business, to build a business of financing trucks!” said RT.


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