DSIJ.in JULY 10 - 23 , 2017 I DALAL STREET INVESTMENT JOURNAL (^55)
What will be the growth
outlook like for coming two to
three years?
We are looking at 12-15 per cent growth
in our AUM for FY18. The first half will
witness slower growth due to
implementation of GST, as the whole
system down the value chain needs to
adopt and absorb the same. We expect
good monsoon to result in demand
pick-up by rural India and growth
outlook of 15 per cent. Also, if our
What is your house view on the
NBFC sector?
NBFC market share is relatively smaller
in the entire financial landscape, and thus
the growth opportunity remains strong.
Also, post-demonetisation, surplus
liquidity in the system makes banks more
aggressive on the pricing front. However,
select NBFCs with their distribution
moat can flex their muscles to counter
this competition. On the valuation front,
the NBFCs are not cheap, but with
growth availability and distribution moat
Umesh Revankar
Shrey Loonker
MD and CEO, Shriram Transport Finance Ltd
Fund Manager, Reliance Mutual Fund.
economy is growing very healthy, STFC
could grow beyond 15 per cent over the
two -three years
Going forward, do you see the
NPA problem subsiding for the
NBFC industry as a whole?
Earlier, the NPA recognition for NBFCs
stood at 180 days. As the entire industry
must move to 90 days by FY18, we have
well equipped ourselves to manage the
same. The whole process will aid in
making the customers more disciplined,
leading to reduction in delinquencies
over the period.
How is pre-owned CV segment
performing for STFC? What are
the major issues faced by STFC
in pre-owned CV market?
Commercial and passenger vehicle
industry witnessed strong recovery in
FY2015-16 due to replacement demand.
The CV industry continued the
momentum in FY17 as well. However,
after witnessing healthy growth of 13 per
cent in Q1, M&HCV truck underwent
sudden contraction period, resulting in
the growth momentum taking a break.
The key factors for the same were
decreasing replacement demand, impact
of demonetisation and the uncertainty
related to the impact of GST on vehicle
prices and the expectation on the prices
to decrease post the implementation of
G S T.
Post the GST and BS-IV implementation,
long term certainty will set in the overall
business environment that would result
long-term positive credit demand.
can offer a good longer term opportunity.
Compared to the banks, have
NBFCs proven to be more
profitable?
Both banks and NBFCs are cyclical
businesses, and thus NPAs are a function
of the cycle and underwriting
mechanism. Also, NBFC business is
more retail in nature vis-a-vis banks,
which are more wholesale focused. The
wholesale businesses have undergone a
prolonged slowdown in the macro
environment, thus resulting into higher
NPAs. However, on the retail business,
banks have performed relatively better
versus their NBFC counterparts – mainly
due to the difference in customer
segment. On profitability, return ratios
have been higher for the NBFCs as banks
have been saddled with NPA issues on
the wholesale side. Thus, certain niche
NBFCs like housing finance, gold
finance, insurance companies have
opened new avenues and provided
superior returns in the financial space
As of May 31, Reliance Banking
Fund has given 22.22 per cent
returns on an annualised basis.
What is the underlying growth
assumption for the fund to do
well?
In the past, banking credit growth has
been approximately 1.5x nominal GDP.
As India is a growing economy, we
expect this to happen for the coming
years. Thus, we believe there is a huge
opportunity to invest in the India’s
financial savings as well as
disintermediation story via niche
NBFCs, insurance companies and banks.
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