Covid-19 Lockdown: Impact on NBFC

R Basil

Q. Since we can see a lockdown everywhere as Modiji has announced.Have you done any initial assessment of the lockdown on the industry as a whole and retail NBFCs specifically?

A: No, the lockdown is basically preventing people from moving around unnecessarily, so it is not a lockdown on the industry as such, and the industry continues to work; just that it has a different way of working. We are serving our existing customers through the digital mode or on the telephone or over calls. Smartphones ease the process of many services by just requiring people to download apps for payments or additional services they need, and in case of difficulties, they can always call as our way of functioning includes a relationship executive for every customer, which gives them solutions through easy interactions. The only question that matters is whether our customers can work whether they havesufficient business or revenue. I don’t think there will be a challenge on the revenue front for customers who are into essential services;the majority of our customers are into essential item services, and since business will continue for us too, many of us would be working from home and for some emergencies, we may reach out to customers by following the norms of social distancing. Ultimately, what is important is to take enough precautions and not receive or transmit the virus inadvertently.

Q. What is the impact on the transport and logistics segment?Is the segment running smoothly, or are there issues you are facing?

A: Presently, all interstate vehicles are halted; even crossing the state border is not permitted so that the virus doesn’t spread between states. Thus, all long-distance vehicles that typically carry industrial goods are not moving, but essential goods required on day-to-day basis will keep moving within the state;of course, not interstate. So, I don’t think there ismuch of a challenge in that (transport and logistics) segment. Even other industry segments such as steel and cement having come to a halt for three weeks may not have a very big impact as they may afford to delay activities. Therefore, I feel, in the country’s interest, and that of our fellow countrymen, everybody would be restricting themselves for 21 days.

Q. Since you lend to the SRTO segment mainly to used CVs for FTUs and FTBs, is there an impact on their cashflows?

A: So, again talking about the customers involved in the transportation of essential items for daily requirements, I think they will continue to play an important role because all day-to-day requirement items come through them; the transportation of non-essential items will be restrained for some time, especially taxi services such as Uber and Ola, which play an essential part in urban mobility; however, due to the current situation, they are not plying, and I think, that is reasonable. However, this may lead to them not being able to pay the instalment for this month. In any case, out of this 36-month contract, there are always these one or two months wherein customers are not able to pay, but they pay subsequently. So, the contract getting delayed by a month or two doesn’t harm anyone, and we normally hand-hold the customer during such times.

Q. How are your managing retail collections as you mentioned taxi services such as Ola and Uber, which are widely used, have to be controlled on account of the lockdown? Is your March collection cycle complete for that segment or is it pending?Please shed some light on the assessment of the same.

A: As far as March is concerned, all dues are mostly collected by the 20th of the month; however, delayed payments would have been left, and these may be delayed further.

Q. Looking at future events, due to the uncertainty over the longevity of the crisis, how much of an impact are you expecting on the financials or business, or how do you plan or strategize to overcome that?

A: Looking at the Indian geography, various parts of the country have been facing or face challenges all the time;for example, somewhere there would be drought, a flood or some other local challenges. So, this is a part of business life. However, a delay in payments by a month, or lesser revenue for a month, is not going to have much of an impact to the company as every company/organisation would be able to service its customers and hand-hold them, take them along. So, that is the way we organise ourselves. We are not in a state of panic for not being able to earn more revenue or reach out to our customers for a month. And, if the lockdown ends by 14 April, we would be able to recope with our April collections by month-end.

Q. Are you, as an industry body, or other NBFCs, expecting any relief measures from the government, given the uncertainty of the crisis?

A: All industries have appealed to the government to give some financial forbearance such as an NPA classification or on moratorium or on supply of liquidity. I believe the government is very proactive and will announce the measures soon after looking into it. Yesterday, the finance minister noted that there is no financial emergency as such, as of now, and they will come up with some measures as and when they see the need arising. We are not in a state of panic or hurry right now for getting the government’s response, and I believe we will be able to handle the situation very well.

Q. As you have been very active in the bond market this whole year, are there plans to raise more funds in the current scenario? Also, what are the investor sentiments like currently?

A: Right now, we have enough liquidity because we raised funds through ECB in January. Also, we have a healthy pipeline to raise funds via securitisation, and we also have term loans sanctioned. However, we do not see an urgency to come to the bond market as it all depends on the overall sentiments of market participants and various other factors,including how international markets are and so the Indian market’s appetite. We do not have plans to hit the bond market for another 3 months.

Q. What is the assessment of the maturities you would be having now?

A: We do not have any issues there as we have enough liquidity on account of reasonably good collections. We do not have to delay or rollover the maturities, and we would be able to make all payments on time.


All opinions expressed by the Participants are solely their current opinions and do not reflect the opinions of Brickwork Ratings (BWR) and its associates and/or affiliates or the companies with which the Participants are affiliated, and may have been previously disseminated by them. The Participants’ opinions are based upon information they consider reliable, but neither BWR nor its affiliates, nor the companies with which such participants are affiliated, warrant its completeness or accuracy, and it should not be relied upon as such.

The Participants may be actively involved in securities trading discussed in the interview/content, on behalf of themselves, their companies and their clients. Also, the Participants and/or their companies engage in securities trading and may hold both long and short options and/or futures positions in the same security, as well as the underlying stock. The opinions expressed by the Participants may be short-term in nature and are subject to change.

Any views expressed is NOT a recommendation to buy, sell or hold any security and/or investments. BWR has no responsibility for any liability arising out of the views expressed here to any parties.