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M. Ramesh

Chennai, Nov. 22 Shriram Transport Finance Company, the country’s largest financier of used truck purchases, says there has been no fall in the resale value of used trucks.

The company’s Managing Director, Mr R. Sridhar, told Business Line on Saturday that transport operators were not expanding their fleet and most of the purchases of new vehicles were going towards replacement of existing vehicles. Therefore, as many used trucks were changing hands in the market, he said.

(Around 1.12 lakh medium and heavy duty new commercial vehicles were sold in April-October 2008, compared with 1.22 lakh in the same period last year.)

“Even last month, we financed the purchase of about 25,000 vehicles,” Mr Sridhar said, adding: “We have not seen any erosion in the resale value of used trucks now, compared to, say June-July”.

This view is contrary to that of some recent research reports. Mr Sridhar said the findings of the research reports were based on “distress sales” made by some finance companies to middlemen. The end-user is still buying the used trucks at the same price as before, he said.

Shriram Transport has a loan book of Rs 22,500 crore, of which more than 80 per cent came from loans given for purchases of used trucks.

Mr Sridhar said some segments of commercial vehicles, such as multi-axle vehicles and tippers, have been affected by the slowdown. However, vehicles for transporting agricultural produce continue to enjoy good demand.

Mr Sridhar said NBFCs faced three risks – interest rates, liquidity and delinquency. He said Shriram Transport needed to manage only the ‘liquidity’ challenge and was okay with the other two. He noted that two sources of funding – securitisation and borrowings from private and foreign banks – were drying up and NBFCs were dependent upon the public sector banks for funding.

In the first half of the current year, Shriram Transport made a net profit of Rs 310 crore, compared with Rs 389 crore for the full year 2007-08.

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