Confidence increasing in vehicle finance segment: Chola Inv

Below is the transcript of Vellayan Subbiah’s interview with Latha Venkatesh & Ekta Batra on CNBC-TV18.Ekta: There was a slight bit of worsening which came into your gross non performing loans (NPLs) this quarter it was 2.8 versus 2.6 percent for the first half of that you did for the fiscal. Can you just tell us where that little bit of marginal worsening came through? Was it within the vehicle portfolio?A: We discussed this the last time as well, basically yes; it has come from the vehicle portfolio. Vehicle gross non performing assets (GNPAs) have gone up to 3.1 percent. However, this was inline with expectations, I would say slightly better than expectations because last time we had discussed the fact that all of our buckets had swelled a fair bit. The things are getting a bit better at least have in the last couple of months of the last quarter. So, I actually think that it is slightly more positive than the numbers indicate. Latha: Can you give us an idea of our spread or your margins? Surely your cost of money has fallen?A: As you can see from our net interest margins (NIMS), our NIMS include all forms of income. Interest and fee income are at an all time high right now. It is closed to 8 percent, depending on kind of which business you look at but the vehicle business is close to 8 percent right now. Latha: Do you see scope for further increase?A: Not too much further than this. 8 percent is a pretty healthy number all we need now is for the collection numbers to come down. If the collections cost and credit losses start coming down that puts us in a fairly strong position. Latha: What is the credit loss now?A: Credit loss is as you know is profit and loss (P&L) item which is slight different from NPAs. Credit losses are basically for vehicle business it is kind of running in the high; it is 1.8-1.9 percent in that range. Latha: You would see them rising further or would they be capped under two percent?A: Part of that depends on out strategy we are right now taking an aggressive strategy towards managing the numbers down. So, let net credit losses (NCLs) go up a bit you can help actually bring down you NPA. So we are taking a fairly aggressive approach towards letting our NCLs go up a bit in an effort to bring down NPA. Which is what we are currently doing we could of the inverse which is let our credit losses be low but then our NPA stay flat that is not our intent over time.

Ekta: When you said that your gross NPLs in your vehicle segment are 3.1 percent compared it to what it was in the previous quarter for us? Secondly how did your home loan portfolio do in comparison?A: Last quarter it was at 2.95 percent so it is up from 2.95 to 3.1. Like I said that is a natural affect of the fact that we have got all of our buckets larger than it used to be. That is our pre NPA buckets larger than they used to be. We have home loan and home equity, both businesses. Home equity is loan against property business; home loan is a tiny business for us. It is a small business where we see a lot of future potential. That business basically is a sub Rs 100 crore book and we have virtually no delinquency on that book at the current point in time. Ekta: You commentary says that you are still being cautious in terms of disbursements within the vehicle segment? Are you confident enough in terms of pushing it up in the second half may be based on the lightly recovery that we could see going into the second half of the fiscal?A: Confidence level is definitely increasing. Are we going to suddenly throw caution to the winds, no? So it is not an on-off switch, it is kind of a shades of ray so we keep moving the dial based on kind of a where we see the current performance and that is driven by, for me the lead indicators always be a collections performance for the last three months. As that gets better we continue to get more confident and kind of push forward. Latha: Can you say that your NPL increase is peaking this was the worst quarter the one that went or you think the pain will last in the current and may be in the next quarter?A: Peaking is than a reflection of the future being better. We would like to think that we are close to peak. Latha: I am only saying that because there are couples of reasons diesel prices have fallen that will mean a little more money with the truck driver, rates are likely to fall. I do not know if you have cut any of your lending rates at all? Life looks a little easier I do not know from the outside but is it for you?A: There is a general hint of good times a head as Prime Minister says. So, definitely there is more of a feeling of that than there was of last quarter for sure.