Shriram Transport Finance (STF), the Rs 45,000 crore Asset Under Management (AUM) company engaged in financing used vehicles, is planning to raise around Rs 1,000 crore through public issue (debt issuance). Besides, the NBFC arm of Rs 60,000 crore Shriram Group also planning to enter rental business for vehicles and equipments.
Speaking to Business Standard STF's Managing Director Umesh Revankar said that at present company's AUM is around Rs 45,000 crore and this would grow by around 15%. “Our rural foray last year, by setting up rural centres has yielded good result and we are planning to double it to 600 in 2013, then expansion of products and new channels are also on the cards”.
He said, to support the growth the company is planning to come out with one public issue with a size of around Rs 1,000 crore. “Every year we would require around Rs 20,000-25,000 crore to meet our disbursements and major chunk of which will be met through debt and from our own business.”
Commenting on Usha Thorat Committee's recommendation for higher provisioning norms for NBFCs, he said, “profitability of the business will not change and our actual credit loss is currently around two per cent, hence we can get write back of provisions. Our fear is, due to 90-day norm the company has to start pressurising customers for early repayments, which may bring down the customer base”.
Analysts said, higher securitisation and favourable funding structure are likely to reflect in improved net interest margins (NIMs), which is around 7.5 per cent.
Meanwhile, the company is planning to enter rental business. “We are looking at entering into rental business of vehicle and equipments. When the economy picks ups this business will be a good bet. In many countries, the rental business is as big as loan book size is,” said Revankar.
He added, many contractors don't want to buy equipments and vehicles and they prefer to hire for 6-9 months, we will lend the vehicle and the equipment.
On the equipment finance, which the company forayed last year, he said it did not achieve the growth which was expected, since infrastructure projects did not pick up. “We estimated a growth of around 25 per cent but achieved only 20 per cent. At present the AUM is around Rs 2,400 crore and we will close the fiscal with Rs 3,000 crore. Next year we are looking at 15-20 per cent growth,” said Revankar.
On industry
Commenting about the industry in 2012, Revankar said, the year started off with uncertainity mainly due to classification of priority sector and securitisation. But towards the end things were little bit better.
The two segments, which the company mainly focus on -- bulk and light commercial vehicles. While the new bulk vehicles sales were not good, due to slowdown in freight market, demand for second vehicles have picked up and LCV business reasonably did well. He noted, this was the first time LCV vehicles have come to the second hand market. Since most of the LCV vehicles were introduced in the market 5-6 years before.
According to him, customers don't want to invest in new vehicles, since they are not sure whether they will get business and also uncertainty in fuel price increase. These two major factors have led the customers to choose second hand vehicles, which cost around 50 per cent of the new one's, though the maintenance cost will be high.
The other factor is demand from rural parts of the country, which are mostly driven by consumer daily needs. Earlier, the vehicles which are catering to towns used to address rural India's need, but today the rural India itself asking for vehicles, thats where LCV plays a major role. This trend will continue as long slow down in economy continues, he said.
