The fallout of the ban on mining in Bellary is expected to compound the problems for the commercial vehicle segment which is already reeling under a slowdown in industrial production, drop in freight rates, and an increase in fuel prices. This segment could, therefore, see a marginal rise in delinquency in the current year, said Mr R Sridhar Managing Director, Shriram Transport Finance Company (STFC).
With the demand for commercial vehicles, new as well as old, seeing signs of slowing down, all eyes are on the monsoon and the emerging interest rate scenario.
“This time around the slowdown is on account of higher interest rates, rather than excess capacity. Our customers don't want to borrow at peak rates as the loans are fixed rate loans.
“So, instead of 10 trucks they may buy just two. This slowdown will affect both new and second hand trucks sales and, hence, the demand for loans,” Mr Sridhar said.
With average loan rates going up by 100 basis points over the last one year, there is bound to be deterioration in the CV financing segment.
As on end-June 2011, Shriram Transport's ratio of gross non-performing assets to total assets was at 2.56 per cent and this could inch up marginally. While the non-banking finance company is still hopeful of maintaining 15-20 per cent growth in assets, it may need to revisit the target if interest rates do not moderate, going ahead, Mr Sridhar said.
‘Critical quarter'
“We have to wait and see how demand pans out in the second quarter. This is a critical quarter. Usually, festival season demand picks up in the third and fourth quarters,” he explained.
STFC, which recently raised Rs 1,000 crore through a retail non-convertible debenture issue, plans to tap the retail market once more during the course of the year.
“When it comes to liabilities we have always remained active in the retail market. Of the incremental funds that we will raise this year, about 20-25 per cent will come from this route,” Mr Sridhar said.