Shriram Transport Finance (STFL), the largest asset finance company in the country, expects growth in total disbursement for the current financial year to remain flat at around Rs 11,500 crore. However, the net profit of the company during 2008-09 is expected to be around Rs 580 crore as against the Rs 389 crore reported a year ago.
“It was a deliberate decision to remain cautious and, accordingly, we have scaled down our advances by nearly 30-40 per cent over the last six months since the global economic crisis intensified. We are ready to go slow and maintain a good asset quality. However, having said that, our assets under management (AUM) should grow by 20-22 per cent in the current financial year,” STFL Managing Director S R Sridhar told Business Standard.
Speaking about the business scenario in the coming financial year, Sridhar said that it would be a very challenging year.
“The disbursement picked up slightly in January and February. But it has again slowed down in this month. Going by the trend and global environment, the overall economic scenario would be very tough in the coming quarter,” he said.
During 2007-08, total disbursement of STFL stood at Rs 11,590 crore, and the total AUM was reported at Rs 19,520 crore.
In a bid to maintain the asset quality, the company is also asking for higher equity participation from its customers. Consequently, for used vehicles, the company is financing up to 60 per cent of the assets as against 70 per cent earlier.
“Similarly, for new vehicle financing, we are now asking for 25 per cent as compared with the 15 per cent equity participation earlier,” Sridhar said.
In addition to this, the company is going slow on repossession of vehicles as borrowers are facing difficulties due to lower cargo traffic. The defaulters are allowed to carry forward their overdues after minor adjustments.
“On an average, 1 per cent of the total outstanding – which works out to be around 8,000 vehicles for our company – are repossessed every year. This would come down this year as we are going slow on it,” he said. For instance, if a borrower defaults for 90 days in case of a monthly instalment of Rs 20,000, the overdue accrues to Rs 60,000. In that case, the borrower is being asked to repay a part of the outstanding amount and carry on with the monthly instalments. “The remaining part of the overdue could be paid after sometime. So we are ensuring that borrowers are able to carry on with their monthly instalments. We have directed all officers not to go in for repossession even if there is no payment after 90 days,” Sridhar said. Similarly, as a strategy to tide over the current downturn, the company has scaled scale down its new truck financing business.
“On Thursday, the freight carrying capacity is greater than the cargo and the number of trips a truck owner makes has come down. So people are not interested in capacity augmentation, which has resulted in a drop in sales of new trucks. Hence, we have scaled it down to around 10-15 per cent of the total disbursement from around 30 per cent a year ago,” Sridhar said.
