Most big banks and non-banking finance providers (NBFCs) have reported collection efficiencies of more than 90% for the September quarter. However, the industrial car (CV) books of financiers continue to lag behind their general collection numbers as the movement of some categories of cars remains restricted. Even the choose-up in collections observed so far could fail to sustain beyond the quick-term, analysts mentioned, as they could have come on the back of pent-up demand and liquidity accumulated for the duration of the moratorium. Luxury buses, smaller industrial cars, college bus operators and cab aggregators are some of the segments exactly where collections are nevertheless below stress, lenders mentioned.
IndusInd Bank, a big player in the CV industry, mentioned that its general collection efficiency in the cars small business was 94.three% for September, as against its typical collection efficiency which hovers in the higher nineties. Sumant Kathpalia, managing director and CEO, IndusInd Bank, mentioned, “Collection efficiency was lower than the average in small commercial vehicles and two-wheelers…SCV, which is the small commercial vehicles, are the most impacted segments from Covid and are slowly getting back on track. In two wheelers, we had accessibility and collection force availability issue, which are getting sorted.”
The taxi aggregator segment, the college bus segment, heavy industrial goods carriers, trailers, container movers and cars attached to hotels and tourism centres are nevertheless some way away from normalised levels of repayments.
Ramesh Iyer, vice chairman and managing director, Mahindra & Mahindra Financial Services, mentioned that these distinct segments are clearly below stress and may possibly stay so for a handful of additional months. School bus operations would commence only in the subsequent academic year. The aggregator-driven cars have began earning some revenues with the opening up of airports and some offices, although they are nowhere close to their pre-pandemic levels. Tourist cars are getting redeployed for alternate use wherever achievable and for that reason, there is a stress on their revenues.
“It could take another two quarters before we can say that they are back to some kind of normalcy,” Iyer mentioned, adding, “those are the segments which have not been able to service their loans during this period and probably these are the consumers who may come up for restructuring.”
IndusInd Bank and Shriram Transport Finance also mentioned that borrowers in the passenger transportation segment, which is but to recover, could be candidates for restructuring. While significantly of the management commentary suggests they are optimistic about a recovery in the subsequent handful of months, analysts are significantly less sanguine. In a note dated November 24, analysts at S&P Global wrote that collection prices, which enhanced sharply in the second quarter, may possibly wane. The trend was aided by the pickup in financial activity given that lockdowns ended and, in several circumstances, by the economic savings of the borrowers. “Given that overall economic activity levels remain soft, savings could deplete fast, potentially hurting future collections,” the note mentioned, pointing out that the CV segment, the fate of which is linked additional closely to the financial activity, has but to recover.
Some analysts have taken the view that the actual level of collections in categories like smaller enterprises and CVs may possibly basically be reduced than reported. In a current note, Dolat Capital Market mentioned, “Higher collections could also be driven by disbursements under the govt’s ECLGS (emergency credit line guarantee scheme) and savings led by six-month moratorium, implying that true collection efficiency for SME (small and medium enterprises), CV could be much lower than reported and that stress could get spilled over to FY22.”