The Hindu Business Line : Replacement market is big for Shriram Transport Finance

Coimbatore, Dec. 11 Shriram group’s flagship Shriram Transport Finance Company (STFC) that specialises in lending to small-time truck operators is betting on the replacement segment to sustain its loan growth at 50 per cent in the second half of the fiscal.

Besides the vehicle ‘upgradation’ push, the drive for phasing-out aged vehicles, expected to gain momentum in the coming days too, is going to aid the company to take the company’s asset management from the present Rs 15,000 crore to Rs 25,000-Rs 30,000 crore plank in the next 3-4 years.

STFC’s loan disbursement during the first two quarters this year has gone up to Rs 4,800 crore compared with Rs 3,100 crore in the same period last year, a 54 per cent growth. The company says this trend may continue for the remaining part of the year.

“In the first six months, our average monthly loan deployment has been Rs 800 crore and 80 per cent of this has gone to financing the small truck operators’ vehicle upgradation,” said Mr R. Sridhar, Managing Director, STFC.

Of the estimated 35 lakh or so truck population in the country, the vehicles falling between five-year-old and 12-year-old category are the crux as they would run into the ‘replacement’ cycle and 80 per cent of them are with small truck operators who largely remain outside the purview of organised lending routes of banks/ larger NBFCs or the financial institutions, as they lack banking practices and hence the ‘risky’ borrower tag attached to them.

According to Mr Sridhar, with mounting pressure from environmentalists and courts to phase out vehicles of 15 years and above India’s truck industry has to spend roughly Rs 1 lakh crore to lower the average age of trucks from the present 11 years to 5- or 6 years as prevalent in developed countries. This would, according to Mr Sridar, certainly come as a business opportunity in the coming years for the company.

STFC which has meticulously developed its business model of catering to the financial needs of this segment of vehicle operators through ‘relationship’ building including an efficient loan recovery system for over 20 years has established its base among small-scale truck operators and is now out to seize the business opportunity arising out of the vast replacement market.

“New highways and roads are being laid facilitating faster surface transport and the truck operators also sense the need for efficient operation of their vehicles to compete in the market. This has brought in the trend of vehicle replacement, the signs of which are already discernible in the market,” according to Mr Sridhar.

Mr Sridhar, here in connection with the first-ever ‘Truck Utsav’, a customer relations jamboree aimed at gathering the small truck owners and their families organised by STFC for the first time in this region, told newspersons that with new vehicles market having slowed down, truck financing from larger NBFCs/banks/institution lenders too have gone down of late. The used vehicle financing for small truck operators would not come easily from these lenders on account of their stiff credit evaluation norms and this has enlarged the scope for STFC to step in on a larger plank as it has its unique financing model well established over the years.

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Replacement market is big for Shriram Transport Finance