M&M Financial Services expects demand to revive from festival season in October2 min read . Updated: 19 Feb 2020, 05:33 PM IST
- Loan collections have shown improvement
- Going forward Iyer expects cashflows to improve
Mumbai: Consumer demand is expected to revive from the festival season in October on the back of transition to BS-VI complaint vehicles, said Ramesh Iyer, vice-chairman and managing director of Mahindra & Mahindra Financial Services Limited (MMFSL).
“I won’t say revival has started. Everyone is getting ready for the BS-6, so inventory level correction is happening. There will be revival from the next festival season beginning October because Bharat Stage (BS) VI will come, prices will get stabilized and people will decide whether to buy or wait and see," said Iyer.
Speaking to reporters, Iyer said on an overall basis, the rural and semi-urban-focussed non-banking financial company (NBFC) is in a comfortable position. He said loan collections have shown improvement and going forward he expects cashflows to improve. According to a Supreme Court order last year on emission norms, the sale of all BS-IV vehicles will have stop by 31 March and only BS-VI vehicles can be sold from 1 April.
“We do see by the next festive season, the market will open up for even higher volumes available to transact along with adequate liquidity. If we have patience for six months, we can see much better days," said Iyer.
He said the company is witnessing an interesting trend among consumers. While people have money, they are using it to discharge liabilities but not acquire assets. This is different from past experiences where if the business was good, collections were good.
“In this round we have seen that while the business is not as good, collections are good. So, people have the money but they do not want to add assets. They may be possibly waiting for the BS IV to BS VI transition to happen," said Iyer.
According to Iyer, while there were liquidity pressures around 15 months ago, the NBFC did not face the problem of not being able to raise money. “We did get sufficient funds 15 months ago but had to pay a higher price then. Liquidity was not our pressure point, it was cost and that too come off now," he said.
In December, RBI governor Shaktikanta Das had said credit flow was slowly reviving to the NBFC sector and the better-performing ones are able to access funds from the market at pre-IL&FS rates. The liquidity crunch was witnessed by non-banks following defaults by Infrastructure Leasing & Financial Services (IL&FS) in September 2018.
The NBFC has also started giving small-ticket consumer loans with an average ticket size of ₹40,000-50,000 to existing customers. “Existing customers do need these loans for which they go to a moneylender or a cooperative bank, so we wanted to support them. It helps us retain that customer," he said.
On capital raising, Iyer said the NBFC is well-capitalised and is around two years away from fund raise.