Shriram Transport Finance may see bad loans rising in H2

Company reported GNPA of 3.27% in September quarter, as against 3.09% a year ago

Shriram Transport Finance anticipates an increase of up to 0.20% in its gross non-performing assets in the next six months as the ongoing economic gloom affects its used truck financing business, a top official has said.

"Our gross non-performing assets should remain at the present level. Maybe 10-20 basis points may go up, but not beyond that," its managing director and chief executive Umesh Revankar told PTI in an interaction.

The three-decade old company had reported a GNPA of 3.27% in the September quarter, as against the 3.09% a year ago. Troubles on the asset quality front were the primary reason behind its reporting a 3.1% drop in the post-tax profit in the quarter.

Stating that a 5% GDP growth is crucial, Revankar said the situation on the asset quality side will improve only in the June or September quarter next fiscal, and the next two quarters will be difficult.

The ongoing economic slowdown has resulted in a dip in demand for truckers, while high inflation has wrecked net earning, said Revankar.

"There are two levels of stress for a customer. One is earning is not expanding and inflation is making your net earning less," Revankar said, expressing hope that GDP growth will bounce back to 5% in the March quarter.

In the first half of the fiscal the economy clipped at 4.6%, of the lowest in many years.

Keeping in mind the stress and the higher cost of funds as a result of the RBI's unconventional moves, the company has lowered its loan-to-value ratio by over 5 percentage points to 65%, and increased its lending rate by 0.50%, in the September quarter.