Infra projects push could revive commercial vehicle sales, says Sundaram Finance Chairman

Infrastructure projects could provide a boost to commercial vehicle sales, which have been impacted by multiple factors including the Covid-19 related lockdown, according to S Viji, Chairman, Sundaram Finance Ltd.,

“The switch over to BS VI norms, effective April 1, 2020 could not have come at a worse time for the Indian automotive industry. Commercial vehicle sales were already projected to be muted due to the economic slowdown and the capacity overhang in the haulage segment. With the Covid-19 imposed lockdown coming into play, this situation has been greatly exacerbated,” Viji said while addressing the company’s 67th Annual General Meeting over video conference.

While demand in the first two months of the current financial year has been virtually non-existent, supply chains have been severely affected as well.

Dim prospects

Unfortunately, the prospects of an early turnaround in CV sales seem dim and will depend heavily on a sustained revival in economic activity and improvement in the movement of goods and passengers, he added.

But, he felt that the infrastructure sector could offer a big opportunity as the budgetary allocations for this sector were significant. “If the various projects get underway, they could provide a boost to CV sales,” he told the shareholders.

Referring to passenger car segment, Viji said there was a school of thought that with social distancing set to become the norm demand for ‘personal transportation’ could see a surge, especially in the entry-level segments. If this hypothesis is proved right, it might provide a boost to car sales especially in the latter half of the year.

Working capital demand

However, he is of the view that much of the credit demand in the near term will be for working capital rather than asset acquisition. Small businesses, including transport operators whose livelihoods have been frozen for nearly two months, will need working capital to restart their businesses and regain their livelihoods.

He stated that rural India was relatively unaffected by the pandemic. A bountiful rabi harvest followed by efficient procurement, the recently announced increase in MSP and the prospect of a normal monsoon in the current year, augur well for the agricultural sector and should lead to a growth in sales of tractors and associated farm equipment.

But, growth prospects will depend on various factors, not least how the pandemic evolves, the prospect of future shutdowns, the impact of social distancing norms and the implementation of fiscal and monetary policy support.

Activity levels in June and July have shown improvement over April and May this year and it is to be hoped that this trend will continue in the coming months leading up to the festive season, he felt.

Answering queries of shareholders on the current scenario, TT Srinivasaraghavan, Managing Director, Sundaram Finance Ltd, pointed out that some business models of our customers could undergo changes which could open up new hitherto unknown opportunities for us.

“Given the heightened uncertainty, we are aligned to opportunities that may open up in the coming months and are constantly scanning the landscape to see what new opportunities might arise. There may be opportunities to acquire portfolios of NBFCs who are in need of funding. Those are possibilities we are tracking,” he added.