Shriram Transport Finance AUM may remain flat in FY21, double-digit growth likely next fiscal

Shriram Transport Finance AUM may remain flat in FY21, double-digit growth likely next fiscal

As 90 per cent of its branches are in non-urban areas, Shriram Transport Finance Company has not been impacted much by the COVID-19 pandemic

Shriram Transport Finance Company (STFC) expects its assets under management (AUM) to remain flat in the ongoing fiscal and post a double-digit growth next fiscal, a top company official said.

"Overall business has picked up in semi-urban and rural markets, I should say it has come to normal. The urban markets, especially the metros, are not fully operationalised. While the rural market returned to normalcy in the last few months, the semi-urban was back to business by August," STFC MD & CEO Umesh Revankar said in an interaction.

As 90 per cent of its branches are in non-urban areas, the company has not been impacted much by the COVID-19 pandemic, he added.

However, the company expects its AUM to remain flat in the ongoing fiscal, Revankar said.

"The kind of spread of pandemic in big cities may not happen in rural areas. We should be able to come back to pre-COVID level in the October-December quarter. So this year we are looking at a flat growth in our AUM and next year (2021-22) we are expected to grow at a double-digit growth," he said.

In the fiscal ended March 2020, the non-banking financial company (NBFC) had seen its AUM grow by 5 per cent to Rs 1,09,750 crore.

The company can see a higher growth in the second half of 2021-22, he said.

"We feel that in the next year, the business will be much higher because of pent-up demand and the infrastructure sector spending by the government will trigger a lot of demand," Revankar said.

He said there has been a solid recovery in the rural and semi-urban market, while urban markets are seeing gradual improvement.

The company is witnessing strong demand for loans for light commercial vehicles (LCVs), intermediate commercial vehicles (ICVs), tractors as well as private passenger vehicles.

Besides, resale prices of used vehicles, LCVs and private passenger vehicles have gone higher than pre-COVID levels, which is good for the company as it indicates good demand, he said.

Speaking about the much awaited scrappage policy, Revankar said the company stands to benefit if the government comes up with some incentives for scrapping old vehicles.

"It is unknown as of now (about the policy). But whatever the cabinet would have to be seen if the government is giving any incentive for scrapping vehicles or not. For say there is no incentive, then there is a challenge for people who want to scrap their vehicles," he said.

Explaining further, he said, "Say there is a scrappage policy for 20 years old vehicles, then a person who wants to discard that vehicle would like to buy another used vehicle (rather) than to buy a new vehicle."

The demand for old vehicles, about 5-10 years old, is increasing and it is an opportunity for the company to grow its business.

Revankar said the one-time loan restructuring will have a miniscule impact on the company as only 3 per cent of STFC''s customers have asked for loan restructuring, which accounts for less than 2 per cent of its loanbook.

Besides, STFC has offered 3-6 months small EMI facility to ease the burden on segments like tourism, travel and staff transportation, which have been affected by the pandemic, and expects the situation to normalise by December, he added.

The company has made adequate provisions and there might not be a need for further provisioning related to restructuring, Revankar said, adding that the only thing to watch is if there is a second wave of coronavirus infections.