Economy positive, demand all across: Shriram Transport Finance V-C & MD

Good demand for used vehicles in rural market, says Umesh Revankar in interview

Vehicle financier Shriram Transport Finance Company (STFC) has its business growing as demand rises vehicles. Umesh Revankar, the company’s vice chairman and managing director, said loan growth for the consolidated entity, formed by STFC’s merger with Shriram City Union Finance (SCUF), will be around 15 per cent. Revankar told Shine Jacob the company is ready for the merger.

Here are edited excerpts from an interview.

How do you see the demand for commercial vehicle financing going ahead?

New vehicle sales are improving and at the same time we are also seeing good demand for used vehicles in the rural market. Rural market has done quite well. There has been some challenge due to unseasonal rain, which was a temporary phenomena. Otherwise, I feel that the overall rural market is quite positive and good.

Do you expect the current global financial situation to affect your business?

The current global situation has not impacted the Indian market or demand, given the overall environment. The only thing that has been quite visible is the rupee versus dollar scenario. It was more on expected lines and is nothing to negatively impact local demand. Crude oil scenario will bring some challenges, because we are importing a lot of crude oil. It may be a while before it will disturb the local economy.

What is the status of merger between STFC and SCUF?

Hearing by the National Company Law Tribunal (NCLT) is over, we will know the status of the hearing and order may be in a week’s time. We expect it to be known by the end of next week. We are fully equipped with the integration part. We are fully ready.

As far as expanding the loan book, what is your growth estimate for FY23?

We had given a guidance of 12 per cent growth on a standalone basis. As of now, we have grown at 11.18 per cent, so 12 per cent is something we will be able to maintain on a standalone basis. On the combined basis, we have indicated 15 per cent and we should be able to maintain that. For the combined entity, we have a plan to add some products to help the existing customer base.

We have lending against mortgages for SME business. We have a certain skill set built for LAP (loan against property) lending, we may look to expand that market as well in the tier II and tier II towns, where there is less of competition.

What were the reasons for the rise in net profit during the second quarter?

The environment for the transportation industry and overall economic activity has been positive. I think the credit demand is quite good. Freight utilization and income levels for vehicle owners are very good. Overall, the demand for both new and used vehicles went up.

We are seeing some buying new vehicles also. Disbursements were strong both in new and old vehicles and collections were equally good at 100 per cent. We also saw improvement in the Stage III accounts. Overall, gross stage III is now around 6.93 per cent, compared to 7.82 per cent during the same time last year. In net interest margin also, there is improvement at 6.98 per cent, which is little improvement over previous quarter, in spite of increase in cost of borrowing, mainly because we were able to increase our lending rates. Construction activities have been good. Real estate too was good. There has been good demand all across.

How do you see the net interest margin trend going ahead?

We always believe that we should maintain it at around 7 per cent, plus or minus may be 15 to 20 basis points. We would be able to maintain the net interest margin at present level.

What are your fundraising plans?

Fundraising is something which is a continuous activity for a non-banking financial company or a bank. You continue to raise money depending upon the growth projection. As per the growth projection, apart from the existing credit line renewing, we look to raise money to the extent of growth.

If you are growing at 15 per cent for the next two quarters for the combined entity, we need to raise resources to that extent. We are well on course. For the first half we have raised around Rs 4,400 crore additional net accretion of deposits. For the combined entity, it would be around Rs 6,000 crore. Deposit will remain one of the favorites. We will also be looking at various bank term loans. (We) will be looking at bank term loans and deposits. For the remaining quarters, we will be able to raise another Rs 6,000 crore from the deposits.