In an interview with CNBC-TV18’s Sonia Shenoy and Anuj Singhal, Shriram Transport Finance’s Umesh Revankar spoke about the trends in the commercial vehicle industry and whether he sees credit offtake picking up on increasing demand.
Below is the transcript of the interview on CNBC-TV18.
Sonia: Could you tell us if freight rates have been hiked? If yes, to what extent and how much do you think it could really impact the truck demand in the near term?
A: Freight rates have gone up a little but it is mostly demand and supply. I don’t think it is hiked across all segment and all geographies. Certain geographies it has gone up and certain geographies are showing a lot of demand for the commercial vehicle. Right now the demand is mostly coming from the mining belt especially Chattisgarh, Jharkhand, Odisha because there is lot of interest and people see a lot of activities.
People are getting prepared for the increased demand of vehicle and rest of India does not seem to be that much having a demand but these belts definitely are and of course Andhra Pradesh is and Maharashtra to some extent we are seeing a good demand.
Anuj: That is an interesting point so would it be safe to say that the down cycle is well and truly over and in some time we might be looking at an up cycle for commercial vehicles?
A: For a heavy commercial vehicle it definitely looks like because there are two sectors which can drive the demand up, one is mining activity and the second one is infrastructure.
Now, this Budget giving so much of focus on infrastructure and allocating higher allocation in the Budget maybe a beginning of a new demand for overall activity and I definitely see the heavy commercial vehicle demand going up and we also are able to witness demand for heavier vehicle that is 31 tonner and 40 tonner.
So, increasingly the demand for vehicles is likely to up to 49 tonne also.
Sonia: So, what about your own disbursements? In the quarter gone by you had a good growth of almost about 40 percent (YoY) in disbursements. Going forward in the next couple of quarters given that demand is showing signs of a pickup, how much do you envisage?
A: The growth will be good. The last quarter increase is basically because of a low base in the previous year so, I do not really attribute much on the last quarter but yes we did plan for a growth and we did identify the geographies where demand would be coming and we have positioned our self and the demand will continue.
The semi-urban areas and some of the rural markets, not all are witnessing a good demand and all these mining and infra related activities are showing a good demand. There is a good demand for dumpers, there is a good demand for heavier vehicles and the used vehicles also are getting a good traction especially in the good agri areas.
Sonia: Has the asset quality situation improved or do you continue to see bad assets from the commercial vehicles sector?
A: There is some improvement but I don’t say we are totally out of it because what we would have built in the last two years, it continues to have some kind of a stress because of the economy being very sow in the last two years.
So, they are just coming out of the issue and whatever the arrears have built in the last two year, over the period it will probably come down but what happens is if the earning is not doubled what it is last year so, what he can pay now is for one installment at a time, so due debt over the past arrears and improving on asset quality in the movement of bracket, that is more payment per month, that may not happen so another at least two to three quarters the gross non-performing loan (NPL) situation will remain in a particular level.
After that definitely if the current trend continues and if the freight rate continues to be strong we would witness a better NPL decrease.
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