Shriram Fin to go slow on loans

In an attempt to tide over the current turbulent economic conditions, non-banking finance company Shriram Transport Finance (STFL) is looking to scale down its disbursements by 20-25 per cent in the second half of the financial year.

“We are disbursing over Rs 1,200 crore a month. It should come down by 20-25 per cent over the next six months. When we have limited access to funds, the strategy is to remain cautious and tide over the cycle,” STFL Managing Director R Sridhar told Business Standard.

The company will particularly scale down its new truck financing business, which contributes around 30 per cent of its total business volume.

“Today, the freight-carrying capacity is higher than the cargo, so people are not interested in capacity augmentation, which has resulted in a drop in the new truck sales. Hence, we are looking to scale it down to half. After this, our total business growth would come down by 15 per cent,” Shridhar said.

The focus area of the company would be the funding of used-vehicles as it does not add to the capacity and remains largely insulated from the changing economic conditions.

Though the company has been able to diversify the risk of defaults by financing a large number of small borrowers, rather than a group of large borrowers, there has been a marginal increase in the default rates as interest rates has gone up by 3 percentage points in the last six months.

Despite the slowdown in its business, STFL is looking to more than double its asset base to Rs 50,000 crore over the next 3-4 years from Rs 22,550 crore at present.

The company is looking to increase its activity in new segments such as freight exchange, bill discounting, tyre finance and truck rentals, which currently constitute less than 10 per cent of the total business.