Shriram Transport Finance Corporation has raised USD 500 million through a bond issue. The demand for this issue was at USD 2.2 billion and therefore was oversubscribed 4 times.
Giving further details, MD, Umesh Revankar said, “This money has come at coupon of 5.1 percent, while the first US dollar bond, when we launched last year April, it was at 5.92 percent. Then in subsequent launch, we gave a coupon of 5.32 percent and now it is at 5.1 percent. So, over the period the cost is coming down, it is pre-hedged. So post hedging, because we do hedge for the full term, it should cost little less than 10 percent (all in cost),” said Revankar in an interview with CNBC-TV18.
When asked if they were borrowing abroad because it was cheaper or for purpose of diversification, he said, "The cost of borrowing offshore is coming down and we always wanted to diversify our sources, he said. "Domestic cost, for us, should be around 9.25 to 9.5 percent all put together, but there is 50-60 bps higher cost for offshore market. However, as things move the cost should come down because our bonds are trading at less than 5 percent,” he added.
Talking about industry sales data, he said, “I do believe that there will be some revival in demand for heavy commercial vehicle because light commercial vehicle (LCV) is doing well. Even year on year it looks as if 15 percent drop is there but last year saw a peak, the highest ever LCV sale. So against that around 15 percent drop is good but HCV drop is steep around 35-40 percent.”
However, inventory levels are coming down with the manufacturers and as they come down, the discounts will come down, he said, adding that once the discounts come down there will be comfort in people buying an asset because commercial vehicles are an earning asset.
When asked about AUM growth, he said, “For the year, we should be able to reach to 8-9 percent even though we were aiming at double digit growth, but first half was conservative for us."
"We were conservative in our lending. We had reduced our loan-to-value (LTVs) and we controlled our lending. Focused only on used vehicles lending and not lending on new vehicles because of discounts and future cash flows are unknown. We were hesitant to lend. So the confidence should come back and we should grow for the year at around 8-9 per.”On repayments, he said, “Definitely there is an improvement because after an extended rainfall, the mining and infra activities have started and that is the reason cement and steel is moving. Therefore, infra projects and mining activity would give some activity for transportation and general business.”