Cash ban not as painful as originally imagined: Sundaram Fin MD

He mentioned that there was slowdown in white goods and two-wheelers.

They don’t have LAP (loan against property) exposures in North India, he said, adding that he has taken his foot off the pedal in terms of LAP.Below is the verbatim transcript of TT Srinivasaraghavan's interview to Latha Venkatesh & Sonia Shenoy on CNBC-TV18.

Latha: Now does it look like people are able to find the money to repay, are people coming back for new loans?

A: It has been less painful than all of us might have feared specifically the big fear was how recoveries would be impacted. I am happy to be able to say, speaking for our company that both in November and to date in December, our collections are tracking as good as they have been through the year that is up to October whatever was our collection, the same trends are continuing even as we get to the end of December. So that is the first thing.

In terms of loan demand, November was certainly muted but that was not only because of this factor, it is also because November generally tends to be a bit of a dull month but it was dull. December, the first ten days were muted but in the last week or so we are starting to see more footfalls in auto dealerships, for example we are getting more deals in even on the commercial vehicle side. So it seems like people are readjusting to the new reality.

Sonia: What about the numbers as far as loan disbursement is concerned. Has it fallen since the last time we chatted with you and what do you see as a loan disbursement growth over the next three-six months?

A: As I said if you just look at November, November this year over November last year there was growth for us but I am not making too much of it but overall if you look at year-to-date, our loan disbursements are still decently up, so there are no concerns there and typically Q4, you would expect, would be  a good quarter and there is a reasonable degree of certainty now that there will be pre buying on the commercial vehicle side because of the new emission norms kicking in on April 1, so I do believe that Q4 will be decent. It may not be one of those big parties which sometimes we have been witnessed to in the past but Q4 will see decent volumes.

Sonia: Can you drill it down to some numbers because in Q2 for example, your assets under management (AUMs) were around Rs 20,000 crore, which was a growth of about 13 percent. What are we looking at in Q3 and Q4?

A: We will be in that ballpark. I am not able to give a specific number but we will be not being too far away from that. It will be in low teens, but certainly growth.

Latha: You think even in Q3 you will have a year-on-year growth because truck freight rates have fallen in several pockets, no takers we were told. So you could have as much of a loan growth in Q3 as you did in the previous Q3 or any more?

A: Compared to Q3 of last year, there won't be growth and that is fair to say because December is certainly not as buoyant as you would expect December to be. So Q3 yes, I don't expect that there will be too much growth or if there is growth it will probably be marginal but Q4 will look more or less like any other Q4 but perhaps a little lower as I said but I am certain as we speak that we are looking at growth in Q4 overall.Latha: Do you track your fleet guys, product wise. We are trying to get to one level below what you are talking. What moved slowly in terms of freight; did vegetables and fruits move slowly, did crops move slowly, did cement move slowly. Where did the lack of growth come from?

A: There are two parts. One is movement of freight which is talking about utilisation of capacity that is already on the ground and the second part is new vehicles added which is what you talk about, when you talk about loan growth and so on. So these are two distinct things. So if you are talking about movement of goods, I think that tends to be different in different regions. I think certainly on the consumer goods side, white goods, brown goods, I think there has been a slowdown. Two-wheeler movement, there has been a slowdown. Cement in some regions has been okay and maybe not in some others, so that is sort of a distributed picture. So that speaks to the point you made about falling freight rates etc, because that comes out of a demand supply thing. So if in certain pockets demand is down then automatically you are going to see rates dropping and especially if there is excess supply in those pockets. So that speaks to capacity utilisation.

Sonia: What is happening with home finance business because over there in loan against property segment, we are getting a lot of anecdotal evidence about pressure seen in pockets like Punjab etc. How weak have things gotten and do you foresee any kind of business risk there in the next couple of quarters?

A: I think much has been written about loan against property (LAP). The risks are certainly exacerbated because of recent events. We, over the last 12 months have significantly taken our foot off the pedal in terms of loan against property and fortunately all of our exposures in the LAP segment tend to be in the southern part, in the southern markets, so we do not have LAP exposures in northern India, for example, so that is not a concern but overall the expectation is that that there will be greater stress on LAP portfolios across the industry though we do not have hard numbers yet to support this hypothesis but certainly the view amongst experts, amongst players in the industry is that there will be greater stress in the LAP portfolios.