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Commercial vehicle financing seeing steady demand, not impacted by high fuel prices, says Shriram Finance

business | Dec 22, 2022 5:53 PM IST

Commercial vehicle financing seeing steady demand, not impacted by high fuel prices, says Shriram Finance


Shriram Finance stated that it was expecting to see AUM growth of 12-15 percent, in line with guidance.

Newly merged NBFC entity, Shriram Finance, has said it expects financing of commercial vehicles to continue albeit at a slow and steady pace.

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In an exclusive chat with CNBC-TV18, the company’s executive vice chairman Umesh Revankar said he does not expect high fuel prices to impact lending, either.
“The problem with CVs began a few years ago when the BS-6 migration brought with it a 15 percent price-hike because of the new technology,” said Revankar, “Hikes in input and steel costs have occurred to the tune of another 15 percent, which means that CV prices have increased by about 30 percent.”
He added: “What the CV price hike has done is result in postponements of purchase and a slow and steady increase in their demand. Today, we expect demand to come from the replacement market.”
Revankar said that the only way high fuel prices would reduce if the government were to reduce taxes. He does not, however, expect prevailing prices to impact lending to the CV segment: “The impact of the fuel price hikes has already been passed (by CV operators) on to the end-consumer — it has had no impact on financing thus far.”
Shriram Finance Ltd. was created a month ago through a merger between Shriram Group's lending institutions - Shriram Transport Finance Corporation, Shriram City Union Finance and Shriram Capital. The merger has allowed the NBFC to leverage its former entities’ individual strengths to bank on a new synergy in its ranks.
The company will require whatever synergies it can muster. Lending has seen a bit of a lull since the festive season in October, even as lenders with heavy market presence in the South bank on festivals like Pongal and Ugadi to see another spike in economic activity.
What will encourage Shriram Finance is that its AUM (Assets Under Management) growth target has stayed intact. On Thursday, the company announced that its AUM in Tamil Nadu had touched Rs 30,000 crore, even as it customer count in the state stood at 10.6 lakh.
“We are on track to hit our AUM growth target of 15 percent by the year-end itself,” Revankar said, “There are some geographies performing better than the others, and some others, like the East, that aren’t performing as much; we expect them to catch up.”
The company’s net interest margins (NIM) have also stayed unchanged at between 8 to 9 percent, its management said. “We have borrowed with long-term liability, which means are NIM has stayed the same,” said Revankar, “We don’t expect NIM to reduce, and will continue to maintain the same level.”
While Shriram Finance foresees no great challenges to the CV and two-wheeler financing verticals — “We are market leaders in both segments and expect robust growth here,” said Revankar — the vice chairman admitted that SME and farm equipment financing will need a lot more work in terms of product availability.
For the moment, however, a combined capital ratio of 23 percent means no fund-raising plans are in the offing. “There is no need to raise capital now, unless we grow at over 20 percent,” said Revankar, “So there are no plans of raising capital as things stand, today.”
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