Will maintain gross NPL at current level: Shriram Transport

A: The cost of funds are reducing especially bond yields have come down and that has an advantage for us in placement of our bonds but the term loan rates have not reduced because bank lending rates have not come down. So it is averaging out to may be around 0.15 to 0.2 percent at this time. Probably when the bank lending rate comes down probably we will have a better advantage.

As far as credit growth is concerned, the credit demand is basically from the rural areas. The urban demand which is mostly dependent on industrial goods and industrial production has not yet picked up in a large scale and none of the infrastructure projects and mining activity also has started. So I don’t think there will be robust growth for next one-two months. May be in the last quarter January to March there could be some movement in the industrial products and that could increase the demand from the urban area. But as far as rural and semi urban areas, the demand is quite consistent.

Ekta: A couple of your interviews a few weeks ago indicated that the festive season was better in terms of disbursements for the company. Can you then give us a sense in terms of whether disbursements would at least pickup for Q3 and whether that momentum has sustained?

A: October looks to be good and we expected that to continue especially there was huge expectation that post Diwali demand will be very consistent on the consumer goods and consumer durables but not much consumption increase was visible. November was not really great for our credit growth but December looks to be little better because the agri goods which were supposed to be moving around November have started moving finally in month of December because of delayed rains and the crop coming into the market has been delayed. I am able to see demand in certain pockets but it is again a semi-urban and rural story, not really on industrial goods or consumer goods.

Anuj: Can you see any kind of delayed impact of the cut in diesel prices? We have seen about Rs 6 cut from peak for diesel prices. Have you started to see any kind of impact from that on demand or would you expect some delayed impact over the next couple of months?

A: Margins are definitely better for the customers. Customers are quite relived to see better margin. If there is a sustained good freight movement then they can enjoy the margin. In certain pockets the freight rates have come down subsequent to diesel price. So it is not that all geographies people are enjoying but some geographies the margins are good, some geographies the freight rates have come down.

Overall I would say the customers, the vehicle operators are relived to see a diesel price cut and some margin improvement. But unless you have a robust freight growth, I don’t think they will be able to employ the vehicle throughout the month and have that better income. So for people to have a better income or better revenue out of the business then moon to buying newer vehicle and more sales, it may take some time.

Ekta: Your gross NPLs were stable in the previous quarter. Would you manage to maintain your gross NPL at that 3.7 percent figure that you delivered in the previous quarter? And two, you have mentioned in articles that you are not interested in a bank license at all, you would prefer to be an NBFC. But would you fit in to may be the small bank license norms that came out?

A: As far as the NPLs are concerned we are quite confident because customer margins are better so we would be able to maintain it in this quarter and next quarter at present level.

As far as banking is concerned we are yet to apply our mind on small bank because we are a large NBFC so how you will be able to adopt to small banks is something which we have not visualised. But as our model is most suitable for the NBFC because we reach to the smallest bottom of the pyramid customer who are operators. We would prefer to be in NBFC line so that our customers are engaged with us.