See no stress in asset quality: Shriram Transport

Umesh Revankar, managing director, Shriram Transport Finance doesn't expect any stress in asset quality of their loans. Revankar says only if there is a decrease in freight movement of bulk goods will there be some sort of stress in repayment of loans.

Also read: Passenger vehicles going at a discount as sales remain slow
What is safeguarding the company from a situation of potential bad loans is their geographical and wide-segment spread. "Since our customer base is mostly retail and individual, the customer does not get into a long-term contract or gets stuck to one particular kind of activity. He is floating between different kinds of movement of goods," adds Revankar in an interview to CNBC-TV18.

Below is the edited transcript of Revankar's interview to CNBC-TV18.

Q: How has loan growth been in the fourth quarter? We are almost ending the quarter with about two-and-half weeks to go. Are you getting a sense that loan growth is much lower than year ago levels? How does it compare to even quarter ago levels?
A: Since we are in a niche segment of used vehicles, our pie has been increasing. Market is as big as it is for us and we are growing. Our loan growth year-on-year should be 30 percent. Quarter-on-Quarter we should be almost matching or little more than the Q3. We should be disbursing around Rs 7,000 crore. What happened in used vehicles is that the market already exists so one is not really depending upon the new vehicle sales. However, the new vehicle disbursement also continues to be reasonably good even though we are not focusing on it. The customer upgradation and the ambition of our customers getting into new vehicles especially in Small Commercial Vehicles (SCV) are doing good. Q: Are you saying therefore you see no signs of stress at all in your customers?
A: The stress levels are not there in our customers. Our customers are totally different who are carrying day-to-day essentials, grains, food, etc. So, they are all cash-and-carry business. One does not see a big stress. When the economy slows down, where there is a decrease in freight movement in bulk goods, then definitely there will be some kind of stress. More vehicles are coming into our segment which are smaller vehicles and they are tier-2, tier-3 cities, but that is a manageable situation. I do not think it is really out of control or it is going bad anywhere. Q: Are you concerned of any kind of an asset quality pressure if not on the loan side?
A: No, right now I am not really seeing any kind of a stress. We have not really focused on one particular segment and we are spread geographically. Since our customer base is mostly retail and individual, the customer does not get into a long-term contract or gets stuck to one particular kind of activity. He is floating between different kinds of movement of goods. Being in the market always and looking at the best possible goods to transport and best possible route, the customer always gets the best of everything. He may probably not get load all the 30 days. He may get 20-22 days which is enough for a breakeven for an individual truck operator. Q: You said there is no stress in the used vehicles. Don’t you loan for new vehicles at all? How is the demand in that segment?
A: We do loan to new vehicles. Our customers have aspiration to get into new vehicles. We do not get into market and buy a market share and compete in the market for new vehicle financing. However, our customers upgrade themselves into new vehicles, because certain contracts or certain routes need them to upgrade into new vehicles. So our new vehicle lending has been quite normal. We have been disbursing around Rs 400 crore per month for last three-four months and it is continuing. This month I have seen a little more demand, probably because the manufacturers are offering better terms. We are able to see a little more traction in new vehicle financing.

Q: We have heard about a lot of discounts which are being offered in general for these auto companies. In order to push through sales, do you all perhaps have to offer lower margins? Is that in anyway going to be affecting your margins going forward?
A: We have not compromised on our Loan-To-Values (LTV) or on our margins. The subventions that manufacturer gave goes to customer directly, so the customer benefits. We normally finance less of subvention so our LTVs are not compromised at any point of time. Q: Have you thought through the bank license issue at all? Have you decided under which company you will apply for a license? How will you restructure yourself? Will Shriram Transport itself become the non-operative holding company and the bank will be your subsidiary?
A: Right now, I am not really looking into this. We have created a core committee which our chairman Mr Duggal himself is heading and he is looking into things. We are looking at various possibilities of getting a banking license.