Rating agencies have revised their outlook on commercial vehicle (CV) financiers to negative from stable. To know how this rating downgrade would likely impact business in the near to mid-term, CNBC-TV18 spoke with Umesh Revankar, MD of Shriram Transport Finance.
“Rating agencies feel that there is a direct link between vehicle transportation industry and gross domestic product (GDP) growth. Since they have revised GDP growth from 7 percent to 5 percent in the last one year, they felt that there could be some difficulties for financiers, which are lending to transport vehicles," said Revankar.
"However, we have tried to convince them that things are improving. Whatever happened in the last two quarters, maybe because of excess rain or slower output in the mining and infrastructure activities and all are now looking better," he said, adding that the agencies have said they would review after one-two quarters. So it is basically on a weaker outlook of the macroeconomy that the rating agencies felt that it would be better to revise their outlook on CV financiers space,” said Revankar
With regards to cost of money, he said it is maintained at October levels. "From September to October it had come down by 10-15 basis points (bps) for us and it is maintained at that level. " Moreover, we do not borrow from the market directly because we don’t borrow for the short-term, we don’t get impacted by the short-term increase in the bond yields, said Revankar. "We normally borrow only long-term and from banks. So, we have seen some decrease in borrowing costs in this quarter,” he added.
Shriram Transport Finance is basically into used vehicle financing and they are seeing the viability and the profits or revenues on running of the vehicles improving because of good agri output and also because the mining belt has been hiring vehicles. "Coal mining has improved in the last one month and all the coal belt has been active,” said Revankar. “In some states infrastructure activities have also begun. So, I believe by January almost all the states will start spending money on infra,” he added.
“Things are improving over many of the geographies. We see increased traction in cement, steel and the construction related activities,” he noted.
Talking about assets under management (AUM) growth, Revankar said, “We are looking at 10 percent AUM growth year-on-year (YoY) as on March. Disbursements have been improving, especially in the month of December. October was a bit weak but November and December has been much better.”