Shriram Transport Finance, Auto News, ET Auto

Collection rates reflect levels of confidence in borrowers, often seen as an indicator of economic activity.

Signaling a return to normal, India’s largest truck lender, Shriram Transport Finance Company, said on Wednesday that its collection efficiency had returned to 100% in the second half of January after suffering a brief hiatus during of the first fortnight.

Vice President and Managing Director of Shriram Transport Finance Company Umesh Revankar said collection rates will increase in February and March as more people get vaccinated and the Omicron variant has less impact on businesses than initially feared.

Collection rates reflect levels of confidence in borrowers, often seen as an indicator of economic activity.

“The third wave (of Covid-19) was only temporary. Doctors are advising normal treatment and people have come out of fear and business is back to normal. Some state governments have imposed restrictions, but later it was reversed, by most of them it’s normal now,” he told PTI.

The company is setting disbursements to reach pre-Covid-19 levels and expects demand to “explode” in the coming months.

“For February and March we think it will be fine. We think things will be normal and it will be pre-Covid-19 levels, demands will increase soon,” he said.

He expressed hope that additional allocations in the union’s budget for infrastructure would boost demand for trucks.

Revankar forecast stronger growth in the fourth quarter. “Fourth quarter disbursements will be higher than third quarter for us. “Net NPA will be reduced below 4%”.

As for liquidity, he said, the company maintained “excess liquidity” and would try to reduce it in the coming quarters. “(in terms of) market liquidity, it’s good, the availability of funds is good,” he said.

On a question on Assets Under Management (AUM), he said, “We will end up with INR 1.28,000 crore. Already in December, the AUM was INR 1.24,000 crore.”

Regarding the outlook for the financial year, he said: “We are quite optimistic. We believe the market will fully recover and we expect 10-12% growth as a stand-alone business. Given that we also have a merger plan, we expect 15% growth.”

In December 2021, Shriram Group announced a composite plan of arrangement for the merger of Shriram City Union and Shriram Transport Finance.

The respective boards of the companies – Shriram Capital Ltd, Shriram City Union Finance Ltd and Shriram Transport Finance Company Ltd have announced the merger, which would be the largest retail finance NBFC in India.

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STFC Vice President and Managing Director Umesh Revankar attributed the decline in profits to revised prudential standards on revenue recognition, asset classification and provisioning for advances issued in November last year, which led to an increase in NPAs (non-performing assets).

“In addition to various regulatory changes over the past 3-4 months (such as ladder-based regulations, rapid corrective action framework, etc.) and a muted first half of FY2022, we note that some of the key segments of retail NBFCs, in particular vehicle finance, are facing supply-side constraints, which could pull growth down from our expectations, although demand remains less impacted by the new wave of infections,” said the agency’s vice president (financial sector ratings), AM Karthik.

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