Economic Activity in Rural area was Good in Q3: Umesh Revankar, Shriram Transport Finance

Umesh Revankar, MD & CEO, Shriram Transport Finance, spoke about third-quarter results and growth on disbursement front, segments for growth and recovery process among others during an interview with Zee Business. Edited Excerpts:

Q: Your performance was good on the operational front, how has been the growth on disbursement front?

A: Demand was quite good in this quarter (Q3) and this growth was backed by delayed the agri-output due to excess rain and Diwali festive. Overall, the economic activity in the rural side was good and this led to an improvement on the recovery side. Asset quality has been good. But the disbursement and credit demand has not been a good one because demand was low in the urban area, while it has been good in the rural sector. Currently, we have a focus on the used vehicle as it is in demand. 

Q: Throw light on the cost of fund of this quarter and what are your projections for the entire financial year (FY20)?

A: Liquidity position is good and there is not a big difference in the cost of funds. There has been around 10 basis point (bps) improvement on Quarter-on-Quarter (QoQ) basis and I feel there can be a 5-10bps improvement in the March quarter as well. However, the liquidity position is strong and we have also raised a huge amount of $500 million through social bond from the international market in the recent past. It is the first time in India in which we have raised the social bond. Thus, the fund position is quite good. 

Q: Name the segments where you have seen growth and the segments on which you will focus upon in future quarters and also tell about the segments where you will reduce it?

A: We have seen noticeable activity in the mining area. Improvement in the mining area can increase the demand for heavy vehicles, a bit. But, much improvement has not been seen in infra activity yet. I had a feeling that there will be a slight momentum in demand for steel and cement but such a guaranteed demand has not been seen in the segment. This is a reason that the heavy vehicle demand has been slow. But I think, rural and e-commerce demand will be a good one. Thus, demand for ICV, LCV and used vehicles will be a good one and we can reach our growth target by focusing on these segments. 

Q: NPA has come down in this quarter. So, let us know about the recovery process and any further improvements in asset quality can be seen from the current levels? 

A: When it comes to asset quality then several changes have been introduced in the way a gross NPA was recognised. Earlier, we had 180 days to recognize an NPA, which reduced to 150, 120 and 90 days and a new IND-AS, a new accounting system has been introduced, now, under which more than 90 days is considered as stage 3, while more than 60 days is considered as stage 2. Earlier, we never communicated to the customer that we will have to provision the account between 60-90 days but now under the new accounting standard, we are supposed to exercise additional provisioning on the probability default. 

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This is why an extra provision was visible, however, we have introduced certain control on it and tried to communicate the same to the customer that the account is provisioned if in there is a delay of 60 days or more. There has been a lot of improvement in stage 2 level. Therefore, there has been a reduction in the overall provision and write off and the provision and we received the write back. This has helped us in increasing our profitability and reap the benefits of the corporate tax.