Commercial Vehicles are an integral part of any business activity in a country and even a barometer of economic growth to a certain extent. Shriram Transport Finance Company Ltd. (STFCL) has been in the financing business since 1979. The company is growing strong along with the economy. As an NBFC STFCL provides an organized way of financing to borrowers in the industry, in line with the banks.
The company has carved a niche for financing used vehicles as the demand for the same is growing and the economy of doing business through these pre-owned vehicles which are financially viable and growing small business sentiment with an owner driver groomed as self-employed business person. We caught up with Mr. Umesh Revankar, Managing Director & CEO of Shriram Transport Finance Company, to get his expert views on commercial vehicle financing.
Excerpts:
Company overview and services offered
We are an asset financing NBFC with assets on balance sheet of Rs. 64,270.66 crores and off balance sheet assets of Rs 12,010.70 crores. We finance pre-owned trucks’ with strategic presence of 5-10-year-old trucks. We have over 1.4 million customers over the last 38 years and developed strong competencies in the areas of loan origination, valuation of pre-owned trucks and collection. Ours is a vertically integrated business model and offers several products which include pre-owned CV financing, new CV financing and other loans like accidental repair loans, tyre loans, working capital finance, etc.
Impact of demonetization
The demonetization impact has proved to be good for the industry in inculcating the habit of financial transaction flexibility moving away from the traditional cash based one. Though the cash transaction would prevail to a certain extent the shift towards electronic payment systems, NEFT, RTGS, UPI, etc., has educated the borrowers to a certain extent. Though we were keen to follow up with collection efforts we could sail through the quarter with good collections. The situation is almost backed to normal now.
Lending rate, disbursement details, incentives and special schemes
We are in the pre-owned truck business wherein the age of the vehicle predominantly 5 to 10 years and the lending rates at an average around 17.5 per cent. The LTV (Loan-To-Value) ratio would be around 60-70 per cent in case of old CVs and 75-80 per cent for new CVs. The critical success factor always has the right mix of scale and skill, and awareness of the load structure and business mix. The valuation depends on loan amount EMI and repayment ability for financing a truck.
Key USPs
We are in the market for near about four decades. The approach is always to be with the customers and customer-centric service and products with a regular footfall to them make us unique. Our understanding of the requirements of the borrower in this category and the valuation expertise which we have built over the decades enable our borrowers to utilize our services. This has led to our launching Automall, a platform for buying and selling CVs, by establishing auction platforms at over 70 places in the country. Many of the leading commercial banks use our services in this platform.
Target customer profile
STFCL works with a strong network of more than 900 branches, 550 franchisees and 900 rural centres across India through 16,000 employees. We have a strong network with the transport industry which has been built over last 38 years. Our tracking mechanism includes networking with the transporters and brokers involved in this business. We have many loyal customers who have been associated with us for long time, which help us by being a guarantor to our new customers, this web of connectivity help us strong bond and help us in expanding our business.
STFCL prefers funding to a driver and help him become owner of the vehicle. We help customer evolve rather than looking at an evolved customer. We try to bring him to our net by engaging him with our existing customers and partners.
Supporting first-time users
Unlike banks, we finance a first-time user basis on his experience in transport industry. We do not emphasise the history of the prospective customer but his prospects and the business planning. While we ensure that enough equity is brought into the business by him to keep risk up to manageable levels, our pan-India network and network with the transport industry makes it easy for us to continuously track the performance of our customer. STFCL believes in helping customers evolve in the business post funding instead of funding an evolved customer.
Partnership with OEMs
OEMs look for support from the financiers for their secondary market too. Supporting existing fleet on the road is most important for any OEM to survive in the market and sell more vehicles to the new customers. STFCL finances used vehicles, which helps in deciding the vehicle value in the market. This also promotes sales of new vehicles and retains the price levels of a vehicle and created demand for new vehicles, which OEMs look forward to from STFCL. We work with the OEMs from the top to understand the products and services offered by them and help them with their future business plans too.
Association with CV dealerships
We have association with CV dealers over years. This has been mutually beneficial and a contributor to the growth of our as well as their business. The association has helped the dealer fraternity to understand the expectations that we have from the prospective customers, which while proposing they try to study and match. This enables us to give the expected service level of the customers and industry.