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NPAs have stabilised and have come down, not gone up: Ramesh Iyer, M&M Finance

We would definitely see H2 turn out to be much better than what we have seen in the past. The festival season was good and even November was good in retail sales. December seems to be promising. We do not have any major issues as far as growth is concerned -- in terms of volumes as well as AUM going forward.

ET Now|
Updated: Dec 06, 2019, 04.00 PM IST
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ETMarkets.com
Ramesh Iyer2-1200
After a good Oct and Nov, expect offtake to be good in December too. This year, NPAs have stabilised and have come down and not gone up. That is a direct indication of customers having money and willing to discharge liability even though they are a little reluctant to add asset, says Ramesh Iyer, VC & MD, M&M Finance, Excerpts from an interview with ETNOW.

The auto slowdown has compounded. Disbursal was at a 14-quarter low when we last touched base. Since then, have things picked up or have they worsened?
October was a big month, given both the festivals fell in the same month and therefore the volumes were extremely high. In fact, in most of the dealerships, the inventory levels have come down. One expected that November will be slow from a retail perspective but the news is good. Even in November, the momentum seems to have continued. I am talking specifically of the semi-urban, rural market and we believe that even December would be good, given the year-end kind of a model change that would happen and in the last quarter. BS-VI would come post April and the dealers would want to offer lots of programmes. We believe the momentum would continue.

How did the landscape change post the festive season? Has the uptick played out as intended?
As I said, the festival season was one of the best and it appears post that, the sentiment has changed. We would wait to see how the farm cash flows pan out during this and the next quarter. Coupled with that and the sentiments changing already, we continue to believe the offtake would be good.

RBI policy indicated that rabi has picked up and is making up for lost ground in kharif. What cues are you getting from rural India and how are you anticipating H2 to pan out?
Even though kharif crop was a little delayed and there was some damage due to extended monsoon, the water level has been extremely good. We expect the next crop to be absolutely good. That is the indication we are getting from some of the pockets across the country and it is positive news which will keep the offtake going up.

How has the AUM growth been since Q2? Is the multiproduct approach doing well? What are you aiming for in the second half?
Our multi-product, multi geography approach has worked well for us. Pre-owned vehicle has been a growth engine and we believe that the momentum of AUM growth that was seen during the year would continue. I said the festival season was good and even November was good in retail sales. December seems to be promising. We do not have any major issues as far as growth is concerned -- both in terms of volumes as well as AUM going forward.

The second half is seasonally a better period for the company when we see business picking up. You have been talking about the projections. Is there going to be considerable improvement in the second half?
This has been historic. Every year, the second half is definitely good, given the festival season and the harvest money coming in. Also economic activity picks up post the seasonal impact. We see the same trend continuing and like any other year, we would definitely see the two quarters of the second half turn out to be much better than what we have been seeing in the past.
Our multi-product, multi geography approach has worked well for us. Pre-owned vehicle has been a growth engine and we believe that the momentum of AUM growth that was seen during the year would continue.

-Ramesh Iyer



What is the current percentage of the repossessed vehicles as a total of the life contracts?
Repossessed vehicles stocks are very, very low. We have about 1,500 branches and the total number of vehicles in stock would be not more than 15,000 or so. So. that is not an area of concern because we definitely see customers willing to come forward and settle their accounts. This is very surprising, as in the past, we found when the business is good, even the recovery is good. That is the outcome of the overall cash flow being good. But in this round, we have seen that even though volumes were low and business was low in the first two quarters, customers kept on discharging their liability.

In fact, our NPAs have not grown like it does normally, in the first half and then starts coming down. This year, NPAs stabilised and in fact, has come down and not gone up. That is nothing but a direct indication of customers having money and willing to discharge liability even though they are a little reluctant to add asset.

The overall collection has been good, the efficiencies have been good, the delinquencies have been well under control and the repossessed stock levels are pretty low. That is not an area of concern at all.

With the overall tax rate cut and also erratic monsoon, what has been the impact on the sector as a whole?
So erratic monsoon had an overall impact definitely, and the sentiments did go low. The water levels are good. Everyone is eagerly waiting for the next crop. Even in this round, one has to look at it by pocket rather than averaging it out.

There would be some good pockets where the yields would be good and with the support price, the cash flow should improve. We generally see the sentiment stabilising post festival and we do see real positivity. With the next crop likely to be good, the overall sentiments will remain positive.

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