We expect an AUM growth of 5-6% in FY21, says STFC's Umesh Revankar

"The festive season has started well for consumer durables and other essential goods/products across the country," says Revankar

Shriram Transport Finance Company (STFC), which focuses on financing pre-owned trucks, reported a profit of Rs 684.56 crore in the September quarter as against Rs 765.05 crore reported in the same period last year. Umesh Revankar, managing director, STFC speaks to T E Narasimhan on the business outlook.  Edited excerpts: 

How do you see demand picking up month on month? Is the demand back at pre-Covid levels?

The credit demand was good in September 2020 due to pent up demand and we expect this to sustain in the third quarter. The demand is quite good in LCVs, tractors and construction equipment in the new vehicle/equipment segment.  However, demand for used vehicles is good across all segments. The main reasons behind growth are the unlocking of economic activity and essential consumption going back to pre Covid levels.

How did the festive season start and how is it likely to pan-out?

The festive season has started well for consumer durables and other essential goods/products across the country.  However, we are yet to see demand for textiles and other non-essential/discretionary products as of now. Hopefully, as we approach Diwali, it should improve to last year levels.

Do you expect your AUM to grow in the ongoing and the next fiscal?

AUM growth would be 5-6% in FY21 and it would be in double digits in the next fiscal.

How are the re-sale prices of used vehicles? How are the margins levels for you?

Re-sale prices of used vehicles are quite good in LCVs, passenger vehicles and tractors.  But since there are too many heavy vehicle transactions, it is too early to predict.

What is the impact of the one-time loan restructuring? What percentage (of your loan book) of customers have asked for loan restructuring? What provisions have you made and are there any plans to make additional provisions?

We have restricted the one time re-structuring to 3% of our AUM and current provisions are more than sufficient on re-structured portfolios. We do not need additional provisions.

Gross NPAs and net NPAs dropped in September. How did you manage to reduce them despite the coronavirus (Covid-19) pandemic? What NPA levels do you see going forward?

In the post moratorium period, most of the customers paid in the month of September 2020 and therefore NPA levels dropped in Sept. We should be able to maintain NPAs at current levels as our customers are able to generate revenue in the current business environment.  We do not intend to sell any NPA portfolio.

What is your outlook for the sector and for STFC? Is there any fundraising on the cards?

We believe our customers, who own and operate their own vehicle/quipment, are able to generate sufficient business and revenue.  Therefore we expect individual owner/small road truck operators (STROs) would continue to expand their business activity and by giving them opportunity to grow, we also grow.  We do not have any plans to raise capital as of now.