May 09, 2012, 08.05 AM IST | Source: CNBC-TV18

Mining ban digs hole in Shriram Transport profitability

Parag Sharma , chief finance officer, Shriram Transport Finance Company says that the year has been tough for the company and mining losses accounted for Rs 80 crore.

Parag Sharma , CFO, Shriram Transport Finance Company

Parag Sharma, chief finance officer, Shriram Transport Finance Company says that the year has been tough for the company and mining losses accounted for Rs 80 crore. Currently, capital adequacy is around 25% and we have to provide for the entire credit enhancement, tier I will be around 15% and tier II will be 4%, it will come to around 19%.

“With slightly better interest rate and prospects of good monsoon, post September we’ll like to increase our volumes,” said Sharma.

Below is the edited transcript of his interview to CNBC-TV18. Also watch the accompanying video.

Q: What led to a 10% fall in Q4 profit? Can you provide information about NIM numbers?

A: The year has been tough for the company and mining losses accounted for Rs 80 crore. Compared to last year, our profit was up around 2% at Rs 1,257 crore. The net interest margin (NIM) is still looking strong at 7.5% vis-à-vis 7.8% for the previous year.

Q: What is your NII in Q4? Also, the number including securitisation revenues?

A: NII in the Q4 stands at Rs 280 crore and if we add securitisation it will be around Rs 805 crore.

Q: What is your view on the RBI release and whether it will impact your growth?

A: RBI guidelines talks about MRR and minimum holding period that should not impact much. We did Rs 8,000 crore of securitisation assignment in last year and we have to see the market appetite under the revised guidelines scenario. There will be some capital requirements if we do pass through certificates via securitisation route.

Q: What is the capital adequacy at this point in time and how much may be used up if you did the securitisation in FY13?

A: Currently, capital adequacy is around 25% and we have to provide for the entire credit enhancement, tier I will be around 15% and tier II will be 4%, it will come to around 19%.

Q: How does business looks in the current quarter? How amount of loan growth did you see in Q4? What is the current quarter likely to look like on year on year terms?

A: Every quarter we disburse around Rs 5000 crore and we are confident of maintaining this pace. We expect growth in the range of 10-15% till September. With slightly better interest rate and prospects of good monsoon, post September we’ll like to increase our volumes.

Q: Hoe do you look at asset quality because in Q3 you did provide for a significant Rs 192 crore as provisions in right offs? Where does that number stand in fourth quarter?

A: Fourth quarter will be almost same at Rs 190 crore. There has been some deterioration in the asset quality but we would like to catch it up in next few quarters.

Q: How does the gross and net NPL picture looks like?

A: Gross NPL is around 3.06 and we have provided 85%, net NPL will be around 0.4%

Q: What percentage of your total AUM is currently securitised?

A: We have an outstanding portfolio of around Rs 18,000 crore of the total assets under management (AUM) of Rs 40,200 crore, roughly around 42-43%.

Q: Do you think the due diligence norms are going to be much tougher and its going to be difficult to implement it?

A: It won't be difficult. We have been undergoing due diligence regularly by most of the investors but the demand for securitisation normally comes only during the September and the March quarter. That is the reason for higher volumes in March.

Q: Are you getting a sense that you are probably done with the worst in terms of NPLs?

A: We have taken the entire hit in term of mining. Asset quality has slightly deteriorated but we are likely to catch it up.

Q: You mean you have peaked off in terms of asset quality at 3.06?

A: Yes.

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