Shriram Transport Finance upbeat on heavy, passenger vehicles segments

Shriram Transport Finance has posted a steady quarter, as demand for heavy and commercial passenger vehicles are on the rise.

Speaking to Bloomberg TV India, the company’s MD and CEO ’s Umesh Revankar said the coming quarters could see an upward pressure on lending rates as demand for vehicle loans are on the rise.

Your loan assets have been growing about 16 per cent. Where do you see the growth coming from?

Right now the demand is quite good in the heavy vehicle segment. It is witnessing bigger demand because there is a big segment change from 25 tonne to 31 tonne, which is a bigger ticket size, and their resale values are very good. Earlier, individuals were not getting into bigger or new vehicles. But now they have started getting into bigger vehicles because they are able to see a good traction there. Right now the major demand is coming from transportation of coal and steel. When there is some diversion from the existing vehicle (for the transport of coal or steel), then there is a shortfall in the goods transportation vehicle. It will lead to more demand for either new or used vehicles. So our focus has always been on single operator or owner-operator. And they are coming with a lot of enthusiasm in this segment. The second biggest growth is in the passenger segment. In this, we are growing very fast and passenger demand is good, especially in the taxi segment and public transportation. One is the aggregators like Uber and Ola who are creating a lot of demand. Individuals who were earlier dependent on tour operators are now encouraged to own and run the vehicle, which is helping.

Your gross NPAs have also risen sequentially. How much of that has been attributed to the equipment financing business?

This result is a standalone. Equipment result is not included in this. The major reason for the NPA increase by 11 bps is the rural economy is not really doing well and there is some stress. And, some of the geographies are seeing a bigger stress in the rural economy, especially Maharashtra, north Karnataka and the southern portion of Uttar Pradesh. The second reason is that the excess rain in Tamil Nadu also had some impact. I feel it should become better because next quarter we are seeing better demand from rural economy. And the NPAs could be managed at a better level than what it was in the last quarter.

What is the outlook on the margins front?

The margins should continue to be better or remain at present levels, because the borrowing cost will further come down for us in this quarter. And if the new vehicle lending goes up, there will be some pressure on lending rates. But we expect that to be not more than 10 bps as far as next quarter is concerned.

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