Speaking on the outlook for the sector and the company going forward Vellayan Subbiah, Managing Director, Cholamandalam Investment and Finance Company said everybody in the space has seen a decrease in the cost of funds and the company per se has shifted their mix more towards debentures.
“When we raise via debentures it is at least 100 basis points cheaper than term-loans for the same tenure, which has helped pricing,” he said.
So, cheaper money is good for the company since two-thirds of their loan book is fixed but that won’t result in an increase in net interest margins, he said, adding that their average NIMs have been on the higher point of the cycle.
However, the non-performing loans going forward would see continuous decline.
The company is also in discussion to move into 90-day recognition of NPAs, which is likely to happen in the next 18 months, said Subbiah. Currently, the company is at 120-days.
The company is primarily focused on the loans to commercial vehicle segment; the HCVs. Subhiah said they now focus on the entire CV segment not just HCVs, as well as passenger car on multi utility vehicle (MUV) segment side along with penetration in the used CV segment.
Outside of the heavy CV segment, there is growth in overall CV market and CV demand. So, basically the LCVs, tractors, used CV etc continue to grow, he said.
On credit growth front, he said the credit cost will be 20-30 bps lower in FY17 versus FY16.
More to follow…