CV finance industry to remain in slow lane: ICRA
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CV finance industry to remain in slow lane: ICRA

Last Updated: Friday, August 09, 2013, 22:04
 
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CV finance industry to remain in slow lane: ICRA
Mumbai: The commercial vehicle finance industry is likely to grow at a slower pace in the near-term, because of higher delinquencies, rating agency Icra said Friday.

"The near-term outlook for the commercial vehicle (CV) finance industry continues to remain subdued as delinquency levels in the commercial vehicle loan portfolio of various originators have been on an upward trend over the past 12 months or so," Icra said in a report here.

The report, however, did not specify what the current delinquency levels are.

The CV industry, since the start of 2013, has entered into a downward cycle following the closure of many iron ore mines, coupled with industrial slowdown and weak investor sentiment across sectors, which have held back new projects.

Input costs for the medium and heavy CV transport operators have gone up significantly due to substantial increase in diesel prices, driver salaries and toll charges.

According to Icra, operating cost of transporters have gone up around 29 percent during December 2011-June 2013 period, while the corresponding increase in the freight rates was only around 12 percent.

Besides, the load availability for the transport operator has come down owing to excess capacity in the system, the report noted. "No immediate revival is seen in the demand and load availability for the transport operators, which will keep their profitability stretched."

While the medium to heavy vehicle segment would continue to be more impacted, the light and small CV segment is expected to remain relatively resilient, given the superior viability of these vehicles in the present scenario, it said.

The report further said the favourable structural changes announced by the government, revival in capex cycle and infrastructure development, and resumption of mining activities would be the key factors which could help in improving market conditions and the CV segment.

While non-performing assets at a systemic level may further increase in the current fiscal, it is unlikely that the asset quality would deteriorate to the levels seen in FY 2009, the rating agency added.

PTI


First Published: Friday, August 09, 2013, 22:04


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