As the risk of worsening asset quality looms large on the head of India’s non-banking finance companies, investors are risk-averse.
As the risk of worsening asset quality looms large on the head of India’s non-banking finance companies, investors are risk-averse. S&P Global’s recent credit rating cut might just be another brick in that wall of worry; however, Umesh Revankar, MD and CEO of Shriram Transport Finance says things are coming back to normal, and will get better. In an interview with Kshitij Bhargava of Financial Express Online, he explains where Shriram Transport Finance stands when it comes to collections and advances and explains what impact the moratorium will have on the company. Here are the edited excerpts.
The past few months have been challenging for the world, how did Shriram Transport Finance deal with collection and giving out loans during this phase?
The challenges that we faced came our way because, due to the lockdown, the activities were muted. The movement was muted so the earnings came down. But since we started unlocking, things are coming back to normal. I think by the end of this month there should be a lot of normalcy in the business, that’s my view. The collection in April was the worst hit, in May it recovered and June is almost near normal and in July it will be normal, that’s how I can put it. As far as lending is concerned, we couldn’t do that mainly because RTOs (regional transport offices) were closed and for any loan transaction, we need to go through them. Only last week these offices opened and slowly our lending is getting back now.
How has the moratorium been for the company and how have the customers availed the option?
it all depends on how we understand the moratorium. So most of our customers paid in March because the lockdown happened on 24th March. So one has taken three months moratorium, they took it for one month or a little more. Even though we offered it to all eligible customers. So moratorium was given to the customer mainly to say that he has not defaulted because there is no due. So that is a comfort the customer gets. So as far as collections are concerned only April they couldn’t pay in May again they started paying. So moratorium is only a comfort for customers not to be called a defaulter.
Has Shriram Transport Finance opted for the moratorium?
We did have discussions with some bankers but we have not availed anything for now.
The share of foreign currency borrowing has gone up, is there anything more planned?
No, not immediately. We want the dollar market to settle down and once the market has settled down we can go and raise. Right now there is a lot of volatility when it comes to transactions and we believe that this will normalise maybe in the second half of this financial year and that is when maybe we will look at it but not for now.
Talking about recovery, how do you see the recovery in both, rural and urban markets?
The rural market has already bounced back. Fortunately, the rural market never went into any kind of pain because May was the time to harvest the crop which was a bumper crop and now the rains have been good. So I think the rural market has remained steady. The urban market might need some time though. I believe for the urban market to revive we need the real estate industry to improve and the infrastructure as well. The government has been taking steps to invest in infrastructure. I guess the urban market may start to do well in September.
What is your position when it comes to liquidity?
Currently, we are very comfortable with our liquidity position
The investors at this point are risk-averse and fear a spike in NPAs for the financials, how would you address that
People don’t really understand what moratorium is. It doesn’t mean no pay, it doesn’t mean that, but what it is that the customer is being given a choice to pay whatever he can during this period. Customers couldn’t pay during the lockdown but post the lockdown everyone is earning and paying and our business model is based on that. So I don’t see any impact of the moratorium.