Born into a middle-class Brahmin family in Chennai, R. Thyagarajan had a simple ambition: to achieve financial independence. His upbringing was modest, but he harbored a desire to carve out a path for himself. As he searched for opportunities to gain financial stability, a job advertisement in 1961 caught his attention and would ultimately set the foundation for his entrepreneurial journey.
Early Career and Entry into Commercial Financing
In 1961, New India Assurance, a general insurance company, offered a training stipend of ₹500, a sum significantly higher than the ₹300 being offered by other companies at the time. Drawn by the attractive offer, Thyagarajan applied and was selected as one of only 12 people chosen for the role. Over the next decade, he gained invaluable experience in commercial financing, learning the ropes of the financial sector. It was during this time that his understanding of financial markets deepened, laying the groundwork for his future endeavors.
However, a monumental change in the Indian financial landscape occurred in 1972, which would push Thyagarajan towards entrepreneurship. On September 20, 1972, the Indira Gandhi-led government nationalized the general insurance industry, bringing 55 Indian companies under state control. At 37 years old, Thyagarajan realized that the time had come for him to take a different path. His experience in the financial world had given him insights into the challenges faced by individuals with no credit history, and this led him to a new idea.
The Birth of Shriram Chits
Thyagarajan’s idea was simple yet revolutionary for its time. He wanted to create a financial model that could provide financing to those who lacked credit histories, primarily truck drivers and small transport operators. Inspired by the concept of a chit fund, he saw an opportunity to help people without traditional access to credit. A chit fund operates by pooling money from a group of investors, with each investor receiving the entire sum, or “pot,” on a rotating basis until everyone has been paid. This innovative idea would later become the foundation of his business empire.
On April 5, 1974, Shriram Chits was born. Thyagarajan utilized the pooled funds to help finance truck purchases for drivers and operators at an interest rate of 37%, significantly lower than the market rate of 80%. This strategy allowed him to attract customers who were otherwise shut out from traditional financial institutions. The venture took off, and soon after, he established Shriram Transport Finance Company (STFC) in 1979, marking the group’s formal entry into vehicle financing.
Expansion and Growth of Shriram Transport Finance
By the early 1980s, STFC had grown significantly, attracting deposits worth ₹800 crore from over 2 lakh depositors. The company was listed on the stock market in 1984, marking a major milestone in its growth trajectory. Recognizing the potential of STFC, industry giants Tata Motors and Ashok Leyland each acquired a 15% stake in the company in 1990. These partnerships further solidified STFC’s reputation as a leader in the truck financing business.
However, the company faced a significant challenge in 1998 when the Reserve Bank of India (RBI) issued a cautionary notice to STFC depositors, warning them that their investments might not be safe due to the company’s practice of lending for the purchase of pre-owned trucks that were 5-10 years old. Many saw this as a risky proposition, but Thyagarajan remained undeterred. Over the next three months, he personally spoke with every depositor, explaining his model and reassuring them about the safety of their investments.
His efforts paid off, and the company’s 98% collection rate demonstrated that truck financing could be a sustainable business. By 2006, STFC had amassed managed assets worth ₹3,000 crore and a profit of ₹100 crore. The company then raised ₹700 crore from TPG Capital and ChrysCapital, pushing its valuation to ₹1,000 crore.
Global Acquisitions and the Road to Success
STFC’s growth continued unabated. By 2009, the company had ventured into construction equipment financing and acquired hypothecation loans from General Electric, a major player in the commercial vehicle manufacturing sector. In the same year, STFC securitized loans worth ₹8,757 crore, raising an additional ₹584 crore in the process. This allowed the company to expand its managed assets to ₹50,000 crore by 2013.
As STFC grew, so did its reputation. The company’s ratings were upgraded to AA+, allowing it to raise ₹25,100 crore by issuing India’s first Masala Bonds, which were Senior Secured Rupee Denominated Bonds listed on the Singapore Stock Exchange. In 2019, STFC reached a historic milestone by crossing ₹1,00,000 crore in managed assets, marking it as one of India’s most successful financial institutions.
Diversification and the Growth of the Shriram Group
The success of Shriram Transport Finance was only one part of Thyagarajan’s vision. Over the years, he expanded the Shriram Group’s operations to include a wide array of sectors, including housing, insurance, wealth management, and real estate. In November 2022, STFC was rebranded as Shriram Finance, reflecting the company’s broader focus beyond just transport financing.
Today, the Shriram Group is a conglomerate that manages assets worth ₹2,33,443 crore. It has over 23 million customers, making it one of India’s most prominent financial groups. The group’s operations span a variety of sectors, with its core strengths still rooted in financing and commercial vehicle lending.
Thyagarajan’s Philanthropic Spirit and Humble Lifestyle
Despite his enormous success and wealth, R. Thyagarajan remains a man of simplicity and humility. Unlike many other business magnates, he leads an unassuming lifestyle. He does not own a mobile phone and drives a modest car worth ₹4 lakh. His life is a far cry from the ostentatious lifestyles often associated with billionaires.
But what truly sets him apart is his generosity toward his employees. In an extraordinary act of philanthropy, Thyagarajan donated shares worth ₹6,120 crore to his employees, sharing the wealth he accumulated over the decades with those who helped build his empire. This gesture reflects his deep-rooted belief in fairness and equality, embodying a business philosophy that values people over profits.
The Legacy of R. Thyagarajan
R. Thyagarajan’s journey from a middle-class upbringing to becoming one of India’s most successful entrepreneurs is a story of resilience, innovation, and compassion. His ability to identify untapped opportunities and his willingness to take bold risks have made the Shriram Group a powerhouse in the financial world. But beyond his business acumen, it is his commitment to sharing his success with his employees and improving the lives of millions through his business that truly defines his legacy.
Today, the Shriram Group continues to thrive, but it is Thyagarajan’s humility and generosity that remain an inspiration to entrepreneurs and business leaders across the globe. His story is a testament to the power of vision, hard work, and the belief that true success lies in uplifting those around you.