Sundaram Finance (SFL), of the TVS Group, is one of the largest asset finance companies in the country with total assets under management (AUM) of about ₹18,603 crore as of June 30. Retail commercial vehicle (CV) and car business constitute around 85 per cent of the total managed advances of SFL. In 2015-16, its 15 per cent rise in disbursements was propelled by 34 per cent growth in the medium and heavy commercial vehicles (M&HCVs) segment. It expects the government’s thrust on infrastructure and tightening of emission norms to help M&HCV volumes to grow this year too. TT Srinivasaraghavan, Managing Director of SFL, spoke about the CV industry, competition, technology and future plans. Excerpts:

Is the share of new M&HCV disbursements on an upward trend? What is the current situation?

The first quarter of this fiscal was buoyant and encouraging for the CV sector. But in July and August, the numbers tanked. There has been a noticeable slowing down in July and August in the M&HCV space. Whether this slowdown will continue or will the sector bounce back, time will tell.

It looks as though Q2 will be duller than normal. There is a certain level of uncertainty. Sustainability is an issue. If the monsoon becomes excessive, that too could do harm and the joy of a good monsoon could go. That is a wait-and-watch for now.

Is this only a temporary blip?

In 2015-16, the CV market (12 tonne and above) grew by 35 per cent. At its peak in 2011-12, CV sales were at 3.5 lakh. Last year, it was at 3.02 lakh and represented probably one of the best years for the CV industry.

However, 30 per cent year-on-year growth is not realistic and this cannot become a benchmark for this industry. Ballpark has to be in the range of 8-15 per cent. How we set expectations is important and one should not keep on raising expectations.

Last year, there was a pre-buying spree in Q2 because of the anticipated mandatory changes in norms. This year, in the second half, there could be a surge because of BS IV norms, which will come into effect from April 2017.

It is important to make numbers intelligible and one has to draw meaningful conclusions from the numbers. Otherwise, it is likely that one will end up with wrong conclusions.

We gather that ticket sizes for new M&HCV loans have been increasing significantly. Is that a game changer?

Talking of large vehicles and larger fleet, we are beginning to see aggregators coming into the CV space. Some of them have acquired in bulk. If the trend continues, concentration of the high tonnage vehicles going into the fleet segment will happen. We have to see as to how this impacts the traditional business model of small and medium operators.

This is a new development. There are winds of change blowing in this sector. There will be some disruption. But I don’t think it will go from one extreme to another. It could change some of the rules of the game. It could bring greater competitive pressure in this space. One has to still understand that the balance is very important because we are a multi-layered economy.

Some changes are for real. Revolutionary things will happen. But all the things that existed before will not die.

The challenge for us is to see as to how we equip ourselves to the different layers of the population. There could be a certain percentage of customers who want cutting-edge technology and we have to cater to them. But there is also still a big percentage of traditional customers.

We have to understand each layer of customers. The ability to understand what each of these segments need and how we are able to service them in the manner that is most appropriate to them is important.

Competitive pressures in vehicle financing segment are increasing. How are you coping with that?

I will partially agree and partially disagree to your part on increase in competition. The current competition is not something new. It started in the late 1990s and early 2000s when banks first aggressively came into this space. Pricing came under pressure at that time.

Later, some withdrew and more banks came in. In recent times, a different set of players have come in.

The recent entrants have stayed the course and have cemented their place in this segment and, therefore, they are long-term players. Yes, to that extent there is competition.

But at the height of competition, then, we found our ways to cope, which explains why we are still growing. When a new challenge comes, we have to find our own ways to compete effectively.

We are looking at penetrating some of the segments deeper where we are already there. In some segments where we have not spread out enough, we are focusing on that now. There is both a deepening and a broadening of our offerings.

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