Shriram Transport has reported a meagre 6% y-o-y increase in net profit for the April-June quarter on a difficult business environment, says Umesh Revankar, managing director of the company. In an interview with
Vishwanath Nair, he says while the next few quarters are expected to be tougher, higher volumes will help protect profitability. Excerpts:
First quarter results have not been very encouraging. Your comments.
We have seen an extremely tough environment and I think we have done a credible job. We have improved our business reach and have been able to hold on to our niche segment of used vehicles and also expand. We have been able to manage asset quality well. Compared with a gross non-performing assets (NPAs) ratio of 3.2% in the January-March quarter, we are at 3.09%, so it has improved sequentially.
What were the reasons behind the slow growth in net profit ?
One thing that slowed the net profit growth was the reduction in net interest margin (NIM), which stood at 7.01%. The yields have come down probably because we wanted to sell newer used vehicles, which are two to five-year old. This is because the customer also wants to move to newer vehicles due to the fuel price increase as these vehicles are more fuel efficient. But at the same time, the ticket size is higher. If the ticket size is higher, the repayment also comes under pressure, so we compromise a bit on yields, so that the customer is also comfortable. This leads to a contraction of NIM, but I feel it is in the interest of the overall portfolio.
What is the trend in terms of asset quality?
The next two or three quarters are expected to be extremely difficult for us. Right now the medium and heavy commercial vehicle segment is a little bit of an issue for us. Unless industrial production goes up, the frieght traffic will be a little lower. The only way we can manage NPA ratio better is by improving relationship with our customers. Our NPA classification still happens after 180 days which we have not changed despite the draft guidelines by Reserve Bank of India. As an optimistic businessman, I feel that the new guidelines will not come in to effect, or rather they should not come into effect.
What is your outlook on assets under management? Where do you think it’s heading towards?
As of now, we are expecting that pressure