Feb 18, 2016 02:53 PM IST | Source: CNBC-TV18

Infra, heavy vehicles aiding AUM growth: Shriram Transport

Umesh Revankar, MD at Shriram Transport Finance says the rural economy will need 2-3 quarters to recover, although performance of certain segments like light commercial vehicles has started improving

Umesh Revankar, MD at Shriram Transport Finance expects 15 percent growth in asset under management during the fourth quarter, led by steady performance in heavy vehicles segment and recovery in infrastructure sector.

Revankar says the company’s gross non-performing loans (GNPL) will transition to 150 days from Q4FY16 and this will likely lead to 100 basis points increase in the gross NPLs.

He pointed out that the rural economy is still weak, particularly certain states like Maharashtra, Telangana and Andhra Pradesh and may take 2-3 quarters to pick up.
Light commercial vehicle segment, though, has started seeing some improvement, he says.

He expects asset quality to consistently improve over next few quarters as resale value of equipment has improved which provides them the opportunity to pressurise customers for pre-closure or part payment.

Below is the verbatim transcript of Umesh Revankar’s interview with Ekta Batra & Anuj Singhal on CNBC-TV18.

Ekta: First wanted to start with your assets under management (AUM) the growth was the highest that we have seen in the past nine quarters in Q3 though it was aided by the festive season. What is AUM growth looking like this quarter and which are the segments possibly leading it?

A: We had given the guidance of 15 percent AUM growth in the beginning of the year. We should be able to have around 15 percent AUM growth for this quarter also. So, the sector which is really pushing is the heavy vehicles and to some extent infrastructure projects. Heavy vehicle movements have been good and the demands for vehicles are steady, that is leading the demand and to some extent the passenger vehicle especially in the transportation.

Ekta: What is the trend looking like in rural areas as well as between your used as well as new vehicles currently in terms of a portfolio?

A: As far as rural is concerned the economy is not very strong. It is looking quite weak. Most of the states especially Maharashtra, Telangana, Andhra Pradesh these are the rural areas where the things are not moving well. Rest of the country it seems to be quite okay. However, the demand right now is basically for passenger vehicle in the rural and to some extent I should say Light Commercial Vehicles (LCV).

LCVs for the first time are looking better in the last quarter and is likely to do well. When I say LCV I am not talking about small commercial vehicles (SCV) which is pick-up truck and one tonne truck. It is between 12 tonne to 5 tonne that is the segment doing reasonably well.

Anuj: Do you expect the disbursement led by rural economy to see an uptake say in FY17 and if do led by what?

A: Rural economy will take little more time because we have to wait for the monsoon. Even though it becomes eternal process waiting for the monsoon every year there is no alternative right now because irrigated lands in India is just below 50 percent. Rest of that is dependent upon rain. So, to that extent rural is little weak.

Rural industries micro, small and medium enterprises (MSME) also has not picked up because of the consumption. What has happened is rural income has come down, rural wages are low and inflation is little higher than the wage growth. So, that is putting a pressure on the overall ability to consume for the rural. So, rural will take time, at least another two or three quarters. Post October, if the monsoon is good we can expect rural economy to pick up.

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