Shriram Transport may lower FY12 loan growth target

Shriram Transport may lower FY12 loan growth target


Mumbai: Shriram Transport Finance Company , India’s top financier for used commercial vehicles, may scale down its loan growth target for FY12 to 10%-15% from 15%-20% as rising interest rates pinch demand, a top official said.

The non-banking finance company, which is seeing a slowdown in loan demand for commercial vehicles, may consider lowering the target by end-September, its managing director R. Sridhar told Reuters over the telephone on Tuesday.

“From beginning of this fiscal year, we are seeing a sluggishness in demand from new commercial vehicles because of higher interest rates," Sridhar said.

The lender also expects its net interest margins to compress 40 basis points to 7.5% by end-March, he added.

India’s central bank stunned investors on Tuesday by raising interest rates 50 basis points, showing unexpected resolve in fighting persistently high inflation despite slowing growth in Asia’s third-largest economy and uncertain global demand.

The rate increase was its 11th since March 2010, making the RBI one of the most aggressive inflation fighters among central banks.

Earlier in the day, Shriram Transport posted a 20% growth in the June-quarter net profit to 350 crore.

Sridhar attributed the rise in profit to asset growth, stable margins and loan quality.

The lender will wait for banks to raise interest rates before passing on the costs to its customers, Sridhar said, adding any further increase in rates could hit demand further.

Shriram Transport had said last month it has set a borrowing target of 12,000 crore for FY12 to meet lending requirement and to pay back debt.

On Tuesday, its shares fell as much as 5.27% before closing 3.37% lower in a weak Mumbai market that was beaten down after the RBI’s policy action.