Cash flow of truck operators have been hit badly in the first quarter of FY22, with a major chunk of them indicating that there might be defaults on EMI payments in the quarter, with operators involved in the transportation of white goods, food items, cold chain and beverages expressing more difficulty in servicing the EMIs, according to a survey by Credit Suisse. The stagnant freight rates and higher variable costs have led to around 20% decline in net profit for 28% of truck operators and around 30% of respondents mentioned that they might not be able to pay more than one EMI out of the three EMIs due in the April-June 2021 quarter.
Credit Suisse said the collection efficiency had been at 50-80% for some lenders in May. The lenders to truckers had expected 50-80% collection efficiency and anticipated only 50-75% of their customers to pay all three EMIs in the June quarter-end. Umesh Revankar, vice chairman & MD, Shriram Transport Finance told FE that he does not anticipate any major negative impact in terms of repayments, as majority of the company’s borrowers are owner-driver customers, rather than the fleet owners.
“I don’t see any major impact because of the lockdown and its impact on the truckers. Even if it is there, it would be minimal, these owner-drivers were plying the trucks ferrying essentials and participating in e-commerce activities,” he said. He said from July onwards, as states are opening up, situation will further improve for the truckers . As far as the collection efficiencies are concerned, there could be 5% to 10% drop in June, he added.
Credit Suisse conducted a survey of 630 truck operators in partnership with Leaptrucks to understand the impact on freight demand, utilisation levels, loan repayment capability, and outlook for recovery. It was done between mid-May and the first week of June in six major states that constitute 47% of India’s GDP. Around 30% of the respondents were from the rural areas.
The survey said more than 50% of operators saw a substantial (over 25%) drop in market demand as against the March levels. Hence, truck utilisation level was below ten days in a month for around 50% of them. Operators transporting parcel, white goods, industrial, beverages and food items saw lower utilisation, but it was relatively better for FMCG, construction, infra and e-commerce segments. Stress was also higher in Maharashtra, Madhya Pradesh and Tamil Nadu when compared to other states, the survey said.
“With collection efficiency dropping to 50-80% in May and around 30% of survey respondents unlikely to pay more than one EMI, we expect NPA ratio for vehicle financiers to reach 8-11% in first quarter of FY22. Small fleet operators are more impacted (lower utilisation and savings) than large fleet operators (higher bargaining power, long-term contracts) and owner- drivers (lower EMI burden and no need to pay driver salaries),” it said.
While only 35% of operators anticipate recovery by September 2021, learnings from the past surveys suggest that the respondents tend to be more pessimistic. Google mobility indicators had started to improve even before most states announced relaxations following decline in number of active cases. This has now picked up pace, as several states get into the unlock phase. Daily e-way bills have started recovering from the last week of May, freight rates are increasing, up 10-14% from May, but still at September-2020 levels, and utilisation improving from 53% in May to 62% in June.
Get live Stock Prices from BSE, NSE, US Market and latest NAV, portfolio of Mutual Funds, Check out latest IPO News, Best Performing IPOs, calculate your tax by Income Tax Calculator, know market’s Top Gainers, Top Losers & Best Equity Funds. Like us on Facebook and follow us on Twitter.