See benign interest rate environment in Q4: L&T Finance

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See benign interest rate environment in Q4: L&T Finance

In an interview to CNBC-TV18, N Sivaraman, president and whole-time director of L&T Finance Holdings says, in the next quarter, he sees benign interest rate environment on the fixed rate. “That should help the NBFCs a bit,” he adds.

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Excerpts from Markets Midday on CNBC-TV18 Watch the full show » ALSO READ See latest News about L&T Finance See previous management interviews See what other Experts & Brokerages are saying about L&T Finance L&T Finance BSE | NSE 29/05/12 Are Mutual Funds betting on L&T Finance?

In an interview to CNBC-TV18, N Sivaraman, president and whole-time director of L&T Finance Holdings says, in the next quarter, he sees benign interest rate environment on the fixed rate. "That should help the NBFCs a bit," he adds.

He further says, the liquidity has not been a major concern so far. "I think RBI has also maintained the liquidity in a very calibrated manner. So, I don't see liquidity to be an issue in terms of raising money," he adds.

According to him, the market is expecting softening of the credit growth and consequently also the interest rate environment.

Below is the edited transcript of his interview with CNBC-TV18's Latha Venkatesh and Gautam Broker. Also watch the accompanying video.

Q: There is expectation that the Reserve Bank's next move will be a cut, though it's not quite clear when, maybe not as earlier as January. Is life getting any easier for NBFCs to raise money because of this anticipation of fallen rates?

A: The liquidity has not been a major concern so far. I think RBI has also maintained the liquidity in a very calibrated manner. So, I don't see liquidity to be an issue in terms of raising money.

But, on the rates side, we are starting to see the longer end fixed rate borrowings starting to ease up a bit, though not available in large volumes. That's a function of RBI's stance and the way the growth has panned out over the last three-four quarters. So, clearly the market is expecting softening of the credit growth and consequently also the interest rate environment.

Inflation has been helpful, atleast the early indications. In the next quarter, we should start seeing some benign interest rate environment definitely on the fixed rate. That should help the NBFCs a bit.

Q: While interest rates may have peaked off, what about demand itself? While many have been pointing out that investment capex has gone down quite significantly, by when do you expect a revival, once the interest rate begins to reverse?

A: I don't think it's sentiment around interest rates that is impacting the investment. Yes, it does take away some basis points or a few percentage points on the IRR estimates. I think it's more to do with the way one is expecting their consumption growth to pick up and from there onwards to move to making investment.

The consumption growth has slowed down from about 8.5-9% to around 7% as we measured the last time around. I would expect that with the inflation easing up and the fresh investment on the infrastructure coming back, you should see the consumption growth peaking up and then the investment intent will very clearly be seen.

The lack of confidence and nervousness are impacting. So, I don't think it's only a function of interest rate. I would expect that with the road sector orders being on the uptake over the last about two quarters, we have seen the proposals being offered and the bids have been placed and the orders have been finalised.

Power sector continues to be limping a bit, given the coal and the environmental issues. In two-three quarters, we should start seeing positive moves on the other larger manufacturing side investment.