According to Umesh Revankar, Executive Vice Chairman of Shriram Finance, typically NBFCs have around 20–30% of their borrowings from banks and the rest from the capital market, so the entire liability does not immediately reflect the rate reduction.
It will take about six months for RBI’s rate cut to be transmitted fully to NBFC liabilities and eventually to customers. Customer demand is expected to revive and overall credit to rise during the peak season starting October–November.
Revankar said, “The demand should definitely pick up. Second half should be the time where the demand should be picking up. Because of good monsoon even the rural demand will keep going up, and the infra demand will pick up significantly, is what I strongly believe.”
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On commercial vehicle (CV) demand, Revankar noted that due to a roughly 30% increase in vehicle prices, the replacement cycle has slowed. The average holding period for a vehicle has increased to around nine years, compared to about seven years earlier, as buyers are holding on to their vehicles longer due to the steep price hike.
He believes that once buyers become comfortable with purchasing new vehicles, the replacement cycle will restart. Globally, the average vehicle age tends to decline to around seven years as economies improve.
Revankar feels the CV cycle is still on an upward trend and has not yet peaked, and expects another two years of strong growth.
Gold loans have been a smaller part of Shriram Finance’s business. Revankar expects their share to increase as the company is focusing more on this segment.
Additionally, many loans that were previously directed toward the unorganised sector or pawn brokers are likely to return to the formal sector, benefiting both NBFCs and banks.
Shriram Finance’s current market capitalisation is ₹1,24,791 crore. The stock is currently trading at ₹663.55 as of 10:04 am on the NSE and has gained 18% over the last year.
For full interview, watch accompanying video
