Expect credit cost to be 2% next yr; eyeing 10% growth in FY23: Shriram Transport Finance

Umesh Revankar, Vice Chairman & MD, Shriram Transport Finance, on Monday, said that fuel price hike won’t impact margin of freight operators. He expects some customers to simply switch over to CNG on the back of a fuel price hike. He also mentioned that fuel prices will be passed on to customers by carriers.

Revankar said, "When I look at the fuel price, retail price has not yet increased. So, I cannot really imagine a situation. At the same time, you would have observed that there are more and more rollout of CNG vehicles across the various manufacturers. That definitely means people would switch to CNG in the new vehicle category and in the used vehicle, definitely yes if there is a price increase now; on the retail- there could be some impact."

"However, the truck operators were able to manage a situation when the fuel price was already high, around two months back. So, it was not that the situation was really bad. Normally what happens is the price gets passed on to the customers. The carriers or operators do not really get impacted directly; there will be lag of one or two days where there will be hit but it gets passed on to the end consumer," he added.

On AUM growth, he mentioned that the company may be unable to meet its target given the uncertain situation. He added that the company is eyeing 10 percent growth in FY23.

Revankar said, “AUM growth- I cannot forecast now, because depending upon how the economy is recovering, if the economic recovery slows down, then AUM growth can slow down as well. Also now the situation is different, we need to really wait and see what exactly happens. So I still feel this will be a short-term adjustment, and probably the growth rate will come back. So everything depends upon the GDP growth rate and the consumption.”

On credit cost, he mentioned that he expects to get back to 2 percent next year. Further, he believes incremental borrowing cost will be lower than re-pricing cost.

“Our credit cost estimation, we did give guidance of 2.6 percent because after the first wave, we had made additional provisioning. So we will get back to 2 percent in the next year. Once the provisioning part of it is over, the next year we will get into 2 percent as a long term average. So 2.6 percent even otherwise is our guidance for this year,” he said.

On debt, he said, "Borrowing cost for us has not really increased in the last two quarters, and we expect the incremental borrowing cost to still be lower than the re-pricing cost because we had borrowed three years back at higher cost. At that time, we had borrowed at a high cost and that we are replacing with a lower cost now. So next couple of quarters, we don't have any impact on the increasing borrowing costs. So our overall outstanding borrowing cost will still come down by around 10 to 15 basis points."

Watch the video for the full interview.