NBFCs on comeback trail with better rural demand

The Hindu Business Line: June 5, 2009

New Delhi: Non-banking finance companies, which had slowed down disbursements
significantly in the second half of last calendar year, are looking to make a comeback.

During September-December there had been a steep fall in vehicle sales which, combined
with the liquidity crunch, had resulted in a sharp drop in NBFCs’ disbursements. But with
vehicle sales increasing, many players are estimating that their disbursements could reach
the levels they were doing at the peak. Others have plans to either foray into new
segments of vehicle finance or increase their reach through more tie-ups.

Tie-ups planned

Tata Capital, which has a presence mainly at the retail level, is looking to enter into tie-
ups with automakers for inventory funding for its dealers. This will enable the company
to become a preferred financer at the dealer’s end. It is also looking to enter two-wheeler
financing just before the festive season begins in September.

“We are hoping to go back to the same level of disbursements that we did during the
peak. Auto sales have been on a rise over the past two months. Our business, which was
flat, has also been on a rise. There is an improvement in sentiments and numbers. It is an
opportunity to capture a decent market share,” said Mr. Avijit Bhattacharya, Head, Retail
Products, Tata Capital.

The company is expecting an average business of Rs. 200 crore monthly.

Mahindra Finance too sees an increased opportunity with more companies eyeing the
rural markets to push sales.

“We will definitely have a growth as rural market is growing. I see increased opportunity
as every manufacturer talks of growth from these markets. There is liquidity and we don’t
see much competition from the public sector banks in these areas,” said Mr. Ramesh
Iyer, Managing Director, Mahindra Finance.

Monthly booster

Fullerton, the subsidiary of Singapore-based Temasek, plans to double disbursements on

two-wheeler loans on a monthly basis.

“The two-wheeler market is looking good. We plan to increase our financing to 24,000
motorcycles against 12,000 on a monthly basis,” said Mr. Ravi Shankar, Executive Vice-
President of Fullerton India. This will increase the company’s monthly disbursement to
Rs. 60 crore from Rs. 30 crore.
Magma Shrachi, the Kolkata-based NBFC, does not anticipate a major jump in
disbursements. It expects disbursements to remain almost on a par with last year’s level.

“We are reviewing the situation quarter on quarter. In the first quarter we are looking at a
disbursement of Rs. 1,000 crore,” said Mr. Ravi Todi, Joint Managing Director, Magma
Shrachi. Last year during this period it disbursed about Rs. 1,100 crore.