No default by any asset financing NBFC over one year: Sundaram Finance MD

The crisis that hit IL & FS, classified ‘erroneously’ as an NBFC, bought the sector under scrutiny. It also made banks “turn off the tap” with mutual funds too following suit. “NBFCs became a bad word overnight,” he laments, going on to add that even well-managed companies became a subject of deliberation, when it came to credit squeeze. “But there has not been a single instance of a default by a traditional asset financing NBFC over the last 12 months. Without fresh infusion, growth was stubbed out,” he says.

The demarcation within the NBFC space should be on asset side description. The risk comes based on the assets side which used to be the case historically. Hire Purchase and Leasing companies were classified separately and so were Loans and Investment firms. Even DHFL is called an NBFC when they are a Housing Finance Company (HFC). A classification system based on the risk associated with assets financed would be ideal, he says in an interview to DTNext.

Trouble comes in pairs, and the veteran is no stranger to this, as right after the NBFC crisis, a slump in the auto industry pulled the rug from under everyone’s feet. “The slowdown in the CV sector started in H2 of last year after a 50% growth in the first half. It has been a free fall since then,” he says. The problems plaguing the CV sector include excess capacity, higher tonnage of CVs, check posts being made redundant. This has meant quicker turnaround times and axle load norms coming into play. Srinivasaraghavan tells us, “There is a massive over capacity. Pre-BS-VI purchases may not happen as excess capacity is a big issue. Even with deep discounts, the needle of retail sales seems stuck. I do not see an early revival in this space. Only after the economy bounces back and the freight offerings pick up, will we see a revival in this sector.”

LCVs and ICVs, in his view, have been less impacted than heavy commercial vehicles on account of slowdown and the e-commerce boom. It is in this milieu that Sundaram Finance is positioning itself as a full-service finance provider to the road transporters. “Apart from financing trucks, we are in the business of financing truck operators. Our bouquet of products is an integrated offering that will take care of needs, including tyre or fuel financing, insurance, working capital or re-financing,” Srinivasaraghavan says.

On collections, the branch network is all that the firm banks upon, he says, while admitting that though the cost of collections had not gone up, efforts have intensified. “In some states, projects have either not taken off or been held up. Cash flows of operators have been hit. The number of operators affected is significant. There are cash flow pressures they are faced with and delinquencies are higher. We nurse customers in tough times. The way we look at credit and manage our customer relationships, helped us control our NPAs effectively,” he says.

The company’s deposit trajectory has been encouraging, with a 15 pc surge in Sept, when it hit Rs 3,424 cr, against March 2019 figure of Rs 2,975 cr but the demand for credit offtake remains a concern.