We are not short on capital. Our parent has given us capital whenever we have required. We are also trying to raise mone y through debt via ECBs, public and private debentures and commercial papers, said Rajiv Sabharwal, MD & CEO, Tata Capital, in an interview with ETNOW.
Edited excerpts:
How has your first year in office has been? By now, you may have formulated the strategy for the next five years. Tell us a little bit about it.
The first year has been really exciting. We are a company which is about 60% retail, 25% SME and 15% corporate/infrastructure. It is a diversified set of assets. We are pretty granular on our book. We do not take bulky exposures and that is what has helped us in creating a book which is of good quality. This year actually saw a fair amount of turmoil post the IL&FS crisis in terms of money becoming slightly tight for some companies or cost of money going up. We never faced a problem on liquidity, we could access money as and when we wanted. We are thankful to all banks, mutual funds and all other entities who have been supportive of this.
The only thing which we saw was a cost of funds moving up during that period but we have seen that post February, once RBI intervened to keep the cost of money in check, the cost of funds has been coming down and it continues to do so.
It has been a turbulent last few months for NBFCs. Is the era of hyper growth coming to an end for this particular sector?
For any entity, growth rate should be moderately high and not be hyper-growth because it is very difficult to control the quality of the book, if you grow very fast. We have seen that playing out in the recent past also. Money is trying to chase those entities with a very strong parentage, good quality of book and which have a strong net worth.
In the past, we saw companies mushrooming on both the NBFC and the HFC side. That will moderate a little bit and any entity which is not right on the product mix, may see a consolidation with some other entities.
We saw the borrowing cost of the sector edging higher. Has this stabilised now and is there ability to pass on that extra cost to the customers as demand in select segments is flagging?
NBFCs have both type of fixed rate assets as well as assets where you know rates are set to a benchmark and move up or down. Whenever there is an increase in cost of funds, you will see some amount of compression in the NIMs of entities unless most of the assets are variable rate assets. The ability to pass on these rates does exist but I would say it is going to be a combination of fixed rates versus floating rate products. If you are biased towards a fixed rate product, then your ability to pass on the existing book is that much more difficult.
Does your work with retail borrowers give you a sense of softness in demand?
Growth rates vary depending on the product. For example, the auto industry has seen some muted growth during the year. The same may not be true for commercial vehicles and construction equipment because both have had good years in terms of growth. If you look at personal loans and credit cards, some of these asset classes have seen very good growth during the year.
Housing again has been a mix because premium housing has not seen a good growth but affordable housing, courtesy the support which the government give to the sector has meant double-digit growth rates. I would say growth rates across the industry as far as retail is concerned, except for the auto sector, have been reasonably good and still there is an opportunity to grow.
What is also happening is that a lot of NBFCs are moving to tier two, tier three markets where competition is slightly lesser and also because some of these markets are less penetrated on credit and this gives an opportunity for lenders to acquire a better market share there.
Over 60% of your book is retail. Currently, how much demand is there in various segments and what strategy are you looking at?
Our strategy is a function of scale, synergy and simplification, the three which are part of our Group strategy. Scale means we want to grow at a rate which is better than the market growth rate .We want to be fairly diversified in our set of asset classes so that no one asset can ever cause us pain. It also allows us not to have any bulky assets on our book. We are also looking at how we can increase our margins on products, how we can expand our ROAs. All these are a part of our thought process on scale.
Coming to synergy, since we are part of a large group, we are looking at how we can work more closely with our group companies to increase our business whether it is working with them to financing them or their customers or the employees of Tata Group companies. We are working on each of these aRead More – Source
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