Commercial vehicle lenders, who were hoping to see a recovery in their portfolios just a few months ago, are now bracing for another round of stress as elevated fuel prices add to the woes of fleet operators.
Lenders have seen lower collections and slower recovery from the segment in the April and June quarter, according to bankers and analysts. The impact of this could be felt by both banks, with exposure to this segment, and non-bank lenders who lend heavily to the transport sector.
Overall, collection efficiency in the commercial vehicle loan segment has ranged between 60-75% over the course of the quarter, according to an estimate by Sanjay Kumar Agarwal, senior director at Care Ratings Ltd.
The impact, according to Rakesh Kumar, analyst at brokerage firm Sytematix Shares, could be significant for lenders with a sizeable exposure to commercial vehicle financing. “Among banks, HDFC Bank Ltd. and IndusInd Bank Ltd. could see some impact during the first and second quarter of fiscal 2022,” he said.
While IndusInd Bank had a 13% share of its loan book linked to commercial vehicle financing as of March 31, 2021, HDFC Bank does not disclose the share of the individual lending segments.
Among NBFCs, Shriram Transport Finance Company Ltd., Cholamandalam Investment and Finance Co. Ltd., Mahindra and Mahindra Financial Services Ltd., and Sundaram Finance Ltd. may see higher impact, said Siji Philip, senior research analyst at Axis Securities. “Even as collections are slowly improving, the impact would be higher for non-banking financial companies than banks due to their higher exposure to the segment,” she said.
Shriram Transport had a 93% share of its AUM in CV loans, Cholamandalam Finance had 30%, Mahindra Financial had 16%, and Sundaram Finance had 48% share.