Biz activity will improve post rate cut: Shriram Transport

Umesh Revankar, managing director, Shriram Transport Finance says that RBI's rate cut of 50 bps can be seen as a positive move for the sector, and it will help in improving the overall economic activity.

This rate cut will lift the sentiments of the customers to borrow more which will lead to more business activity, he said in an inteview to CNBC-TV18. Below is the edited transcript of his interview to CNBC-TV18. Also watch the accompanying video. Q: Do you see business improving in your sector after yesterday’s rate cut of 50 bps?
A: A rate cut of 50 bps is a positive move. The investment climate was gloomy and this rate cut will help in improving the economic scenario. Once the economic activity picks up, there will be a good movement of the overall goods and freight which will in turn help our industry.
Last year's numbers indicate that, sales of heavy vehicles were flat at around 5-6%. However, sales of smaller vehicles have increased mainly due to rural and agricultural activity. Higher industrial output and better economic activity will increase the sale of bigger vehicles, which is a barometer of the overall indication of positive response. Q: Does your cost fall drastically in terms of cost of money in the first quarter of FY13 compared to the fourth quarter of FY12?
A: It may not have a big impact in the first quarter. However, over the period it may have a positive impact. We have raised sufficient fund through securitisation in March. NBFC industry which is dependent on bank for borrowing would have an advantage and that could be passed on to the customer and that will probably lift the sentiments of customers to borrow more.
Q: Will your margins improve? How do you see them in FY13?
A: Margins may not improve significantly as we have passed on the rate cut benefit to our customers. There could be a slight improvement in the second quarter and it will last for 3-6 months. Q: Do you expect to gain about 4% in terms of growth in FY13?
A: Growth, basically depends upon the GDP growth. GDP growth above 7% should give us enough room to grow. We have a huge base of above Rs 40,000 crore assets under management and 10-15% growth on that is good. We all expect industrial climate to improve to increase our growth. Q: Are you seeing a lot of competition from both public and private sector banks?
A: Yes. There is competition and we welcome the competition. Ultimately, customer will go for better service and Shriram provides unmatched services. We have one-to-one relationship with our customer and our entire business model depends upon the relationship. In last fiscal year we have seen many private sector banks opening up in the semi-urban and rural market and lending directly to customers. We have further improved our service, basically we have improved our turnover time of lending and we are catching up.