Umesh Revankar, MD & CEO, Shriram Transport Finance, spoke about his expectations from FY20, liquidity concerns, outlook on NPAs and second-hand truck business during an interview with Swati Khandelwal, Zee Business. Excerpts: 

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Q: What are your expectations from the first quarter of the financial year (FY) 2019-20? Also, provide your outlook for FY20?  
A: There will be a positive volume growth in the fourth quarter when compared to the third quarter, which saw a slowdown and fall in credit demand. However, there was an improvement in credit demand in the fourth quarter. I feel that we can grow positively in the new fiscal as there will be a pre-buying pressure from August 2019. Secondly, a good monsoon can boost demand. We are working on a growth plan of around 18-20 per cent in FY20. 

Q: Elections are around the corner and we would like to know about the expected spike in demand in rural sector specifically for tractors? 
A: I can’t establish any relation between election and tractor demand and have never seen such a thing till date. So, there may not be any additional demand for tractors. 

Q: How is the liquidity situation of India, at present, as we have seen liquidity concerns in recent past?
A:  Liquidity situation is fine as I can’t see any problem over there and the same is with the NBFC industry. Besides, our company has issued dollar-pounds and our securitisation program is on line. So, I can’t see liquidity challenges at present and things are quite smooth. However, the cost of borrowing has gone up, but our pricing power enables us to pass it on to the customers. So, we may not face a huge spread and margin pressure. 

Q: Let’s talk on the inventory levels that has increased in the auto sector, but demand hadn’t returned even in case of trucks. Will this slowdown will have an impact on your business, if yes, then to which level?
A: If you have a look on the sales of the new vehicles than you will find that there was a decline in sales of heavy vehicles in October, but it was not so in case of LCVs, which has maintained its growth rate. Thus, growth rate and sales of heavy vehicles have gone down. I feel, it will pick-up as soon as focus returns on infrastructure, which has slowed in October-November, but a pick-up can be seen in the sector now. However, there is a slowdown in the real-estate sector, which can have an impact on the demand for cement, steel, sand and other building materials. I feel vehicle sales will improve as soon as there is a pick-up in the real-estate sector. 

Q: Update us on the existing cost of funding situation?
A: We should keep an eye on inflation as food inflation, which is under control will have a positive impact on CPI. As inflation is under control, the RBI may give indications that we are under normal inflation. The indication may take down the interest rate. So, the increase in liquidity can bring down the cost of funds by next year. 

Q: What is your outlook on NPAs?
A: Collections has improved in this quarter. Business wise things are good and when it comes to repayment then we are not facing challenges. In addition, we can’t see any stress in rural areas and it is April, the month when winter crops are brought in the market. So, I feel, that NPA levels will go down especially at gross NPA level. Normally, we see the impact of NPA levels at the credit cost, which has improved at our end and it is around 2.25. So, I think that the credit cost will go down over a period and NPA impact will be reduced by next year. 

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Q: You talked about sales in different categories but tell us about the second-hand truck business and the strategy to cater to that segment?

A:  Used vehicle is a major part of our business and it has 85 per cent contribution to our business. So, we have a focus on individual small operators, used vehicles and sub-urban rural market and we have our presence in the domain and manage it well. We have a market share of around 25-30 per cent in the segment and can also acquire a large part of this market. We are opening new branches in rural areas to increase our reach, which is essential for the used vehicle business. I think that we can grow by 15 per cent in the segment.