From being a plain vanilla lender to commercial vehicles, Shriram Transport Finance is transforming itself into a one-stop shop, particularly for truck owners. Be it AutoMalls, Shriram One Stop, Shriram New Look or the touch-screen kiosks, the largest commercial vehicle financier in the country is going hi-tech. Having embarked on equipment finance business, the company is eyeing assets under management worth Rs 50,000 crore in the next two years. R Sridhar, Managing Director, Shriram Transport Finance, tells Niladri Bhattacharya even though they aim to grow bigger, their core business of providing finance to small and marginal players will very much remain the same. Edited Excerpts:
Tell us something about the recently launched Automalls? How will this model benefit customers?
Automall is a first-of-its kind initiative which will give the country’s large community of truck-owners a chance to trade their vehicles in a hassle-free manner. At Automall, apart from trading and repair facilities, truck owners will be able to explore financing and insurance options. The overall plan is to have 50 such strategically located facilities on all the important highways of the country.
Road transport is the lifeline of India’s growing economy. Automall will benefit truckers in promptly replacing their vehicles, leading to modernisation of the country’s trucking fleet. The facility will house hundreds of pre-owned vehicles both in ‘as-is-where-is’ and refurbished conditions and truckers will be able to trade in a transparent manner.
So, this be a one-stop-solution for customers.
Absolutely. Automall will also house ‘Shriram One Stop’, a computerised touch-screen kiosk which will be a virtual Truck Bazaar providing real-time information about used commercial vehicles available for sale. Simultaneously, it will facilitate registration of an individual buyer’s requirements. One Stop will bring more transparency while buying and selling used commercial vehicles.
It will also include Shriram New Look, wherein refurbished pre-owned commercial vehicles will be put up for sale with in-built financing options.
Being the largest operator in your space, how do you see the market scenario amid the rising interest rates and high inflation?
The demand for commercial vehicles continues to remain robust and the freight rates are going up too. However, the short-term growth outlook remains sluggish. With the interest rates going up as a consequence of high inflation, there are liquidity pressures. The pace of project implementation remains a matter of concern. Also, demand from sectors like mining has been affected.
How will it impact your margins? How much do you plan to borrow in the coming financial year?
For us, the impact on margins will be minimal as 75 per cent of our exposure is towards used commercial vehicles. The same continues to grow by more than 20 per cent as this business is not cyclical. Thus, the impact will be limited to the new vehicle segment, constituting around 25 per cent of our vehicle financing business. Also, 75-80 per cent of our borrowings are on a fixed rate. So, the impact of rising interest rates will be to that extent only.
During 2011-12, our total borrowings will be around Rs 9,000-10,000 crore, raised through usual routes like bank borrowings, retail deposits etc.
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How do you see your business over the next two years? What will be the contribution of the equipment finance business?
In the next two years, we are aiming at an AUM of Rs 50,000 crore, of which new business like the equipment finance one will constitute 10 per cent of the total.
Since you are a late entrant to the equipment finance business, how are you placing yourself in the market? How is the business doing?
If you look at our core business, which is commercial vehicle finance, our focus area had been small and marginal players with limited credit flow. Similarly, for equipment finance, we will be focusing on small and medium contractors.
The equipment finance business is picking up well and will close this financial year with a disbursement of Rs 550-600 crore. The company finances new as well as used equipment and will target small and medium contractors. New equipment finance will constitute 75 per cent of the portfolio. By FY13, the loan book under equipment finance will be around Rs 5,000-6,000 crore.