Gross NPAs likely to remain at 2.74%: Shriram Transport

Fourth quarter has been quite stable for Shriram Transport Finance Company and it has performed little better than the previous quarter (Q3), said Umesh Revankar, managing director, Shriram Transport Finance Company.

"We have been able to maintain the asset quality. Our collections have been good and our transporters are also feeling quite comfortable with current economic scenario," he added. However, the gross NPA percentage is likely to be similar to the third quarter. "In Q3 it is around 2.7% and should remain same in Q4 because we have huge retail customers and there are small individual customers who are dependent on vehicle for livelihood," he said. Below is the edited transcript of the interview. Also watch the accompanying video. Q: There are reports doing the rounds that you had three quarters of quite a lot of volatility but there was Q4 which was expected to be quite stable for you’ll how has operations been in Q4 and in total for FY12 and how can we extrapolate that into FY13? A: The Q4 has been quite stable for us and we would have done little better than Q3 on advance terms. The most important thing for us is keeping asset quality healthy because when economy was low, all were worried about that and we have been able to maintain the asset quality. Our collections have been good and our transporters are also feeling quite comfortable with current economic scenario. This is because concerns about freight rates coming down or vehicles remaining ideal have not been there in Q4. That makes us very comfortable. This year we might have to wait for the first six months, but the second half should give us a good push and results should be better. Q: As per analyst report in the case of used CVs losses recently increased on a 90 day plus basis. That is interest payments not coming up to 90 days is that true? How has the experience been for new vehicles and more importantly used vehicles? Were slippages higher in the Q4 or as high as the Q3? A: It is not true in our case because used vehicle are mostly used for rural market and captive use. It normally carries agricultural goods and for essentials and there has not been much load on agriculture produce. There is a bumper crop, rice and wheat is also a bumper crop. So, these are the two major crops in India. All the agricultural commodities and agricultural produce have been doing well and essentials have also picked up well. Maybe consumer durables have not picked up as much as expected. Q: You did go through a bit of a shudder because of the mining ban can you give us an idea of what your slippages were in the Q3 and what they have been in the Q4? A: Our gross NPA percentage should remain almost same. In Q3 is around 2.7% and should remain same in Q4 because we have a huge retail customers and there are small individual customers who are dependent on vehicle for livelihood. The delinquency level maintaining at 2.7% has been quite a good task we have achieved. Q: What about the loan to value ratio. We understood that you had reduced the loan to value ratio in earlier months just to play safe now are you able to give more loans what is the percentage from Q3 to Q4. Was there a change? How will that impact margins – margins would have improved? A: Loan to value remains very conservative. We have reduced 5% in the month of September-October and that has remained, but the resale values have been going up. Due to increase in the prices of new vehicles the used vehicle prices are gone up substantially that is giving us some scope for increasing the ticket size, but not on the LTV. _PAGEBREAK_ Q: Give us some guidance in FY13 what exactly are you expecting in terms of loan book growth and what are you expecting in terms of NIMs? A: Our expectation is broadly based on what is the GDP growth and the general economic activity because the freight movement is totally dependent on economic activity. For us luckily the rural markets remain steady and good. To that extent we are very comfortable and we are confident of growing in tier II cities and the smaller cities and villages. As far as urban cities are concerned, we are mostly dependent on the industry production. Overall if you look at it I feel we should be growing at around 12% to 15% if the GDP grows beyond 7%. Q: What were your net interest margins in Q4? Do you expect you will be able to improve them in the Q1 itself, the current quarter? Are you anticipating some fall in the cost of money? A: As far as NIMs are concerned, we have been always playing in a band of 7% to 8% and that will continue. Whenever we feel are NIM contracting because of a new vehicle lending because new vehicle lending is where the competition is high, we are forced to lend at a little lesser rate. We try to increase the used vehicle lending so we try to manage it between 7% to 8%. We have been successful entire last year and this year also it will be in the same range. Q: There are multiple brokerage reports which also highlight the amount of competition which is actually going to increase from a medium term basis for NBFCs what is your perspective with regards to the comparatives scenario and how difficult a challenging do you think business can get? A: The competition is there in new vehicle lending especially in the strategic customer where the big fleet operators are operating. Banks have been lending there and some of the NBFC have been lending and we are not present there. We have been present in retail customers and most of the new vehicle buyers have been our customers who are upgrading from used vehicles to new vehicle. They have remained with us in spite of the competition. When there is a huge growth on the small vehicles especially 20%-25% growth, you would have seen in the last year in the small commercial and LCVs - some of the banks have entered there and have reasonably build good market share. I don’t think we have really lost much there. We have focused mostly on used vehicle and our ratio used to be 70:30 – 70% use to be used and 30 on the new that has tilted to 75: 25 during the last year.