Vishwanath Nair, he says while the next few quarters are expected to be tougher, higher volumes will help protect profitability. Excerpts:
First quarter results have not been very encouraging. Your comments.
We have seen an extremely tough environment and I think we have done a credible job. We have improved our business reach and have been able to hold on to our niche segment of used vehicles and also expand. We have been able to manage asset quality well. Compared with a gross non-performing assets (NPAs) ratio of 3.2% in the January-March quarter, we are at 3.09%, so it has improved sequentially.
What were the reasons behind the slow growth in net profit
One thing that slowed the net profit growth was the reduction in net interest margin (NIM), which stood at 7.01%. The yields have come down probably because we wanted to sell newer used vehicles, which are two to five-year old. This is because the customer also wants to move to newer vehicles due to the fuel price increase as these vehicles are more fuel efficient. But at the same time, the ticket size is higher. If the ticket size is higher, the repayment also comes under pressure, so we compromise a bit on yields, so that the customer is also comfortable. This leads to a contraction of NIM, but I feel it is in the interest of the overall portfolio.
What is the trend in terms of asset quality
The next two or three quarters are expected to be extremely difficult for us. Right now the medium and heavy commercial vehicle segment is a little bit of an issue for us. Unless industrial production goes up, the frieght traffic will be a little lower. The only way we can manage NPA ratio better is by improving relationship with our customers. Our NPA classification still happens after 180 days which we have not changed despite the draft guidelines by Reserve Bank of India. As an optimistic businessman, I feel that the new guidelines will not come in to effect, or rather they should not come into effect.
What is your outlook on assets under management Where do you think its heading towards
As of now, we are expecting that pressure on these numbers will be much higher, since the environment is tough. We should see a 15% increase in AUM, for the year. Tractor , passenger and commercial vehicles should contribute to the growth.
Last year you said the growth in southern India was slow. How are things looking this year
Geography wise things are looking stable. In Karnataka, a stable government has come, rural business in Andhra Pradesh is also doing well. Tamil Nadu had some issues last year due to a drought in the Kaveri delta. This year, the good monsoon should help Tamil Nadu.
Your employee expenditure has jumped over 19.4% from a year ago. What is the reason for this
We have added more manpower, about 2,000 people, so the operating expenses have gone up. But even in this difficult environment, we feel we need to manage our relationship with customers better and therefore more manpower is needed.