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NBFCs are cornering market share in two-wheeler finance despite liquidity crisis

Non-banking finance companies (NBFCs) have seen their share in two-wheeler financing go up sequentially despite the recent liquidity crisis and a tighter profiling of the buyer.

Finance arms of the three listed companies Bajaj Auto, Hero Motocorp and TVS Motor Company – which together control 65 percent of the domestic two-wheeler market – have experienced a rise in their market share.

Other two-wheeler players such as Honda, Yamaha, Eicher Motors-controlled Royal Enfield also depend on NBFCs for sales push.

In the two-wheeler market, nearly three-fourth of the sold vehicles are financed. NBFCs have up to 40 percent share in the market.

Kevin Dsa, president finance, Bajaj Auto, said, “Fortunately for us, we have Bajaj Finance. They are well-capitalised and there is no shortage of funds. So Bajaj Auto is not facing any financing issues whatsoever. I would say that auto finance is doing extremely well. In September, they had a penetration level of almost 48 percent (meaning 48 percent share of financed vehicles). From an average of 41-42 percent, Bajaj Finance has grown to this level”.

Pune based-Bajaj Auto outpaced the industry growth in the motorcycle segment during the six months ended in September as per data supplied by the Society of Indian Automobile Manufacturers. Recording a growth of 27 percent (as against 10 percent of the industry) during the period, the company clocked sales of 1.28 million in the domestic market.

Similarly, Hero Fincorp, the financial services arm of India’s largest two-wheeler company Hero Motocorp, has remained stable along-side other NBFCs.

Presently, 36.5 percent of all two-wheelers (bikes and scooters) sold by Hero are financed. Of this, Hero Fincorp’s share stands at 11.5 percent of all vehicles sold, as per details shared by the company’s top management at a recent conference call post the announcement of second-quarter results.

“We have not seen any impact in terms of financing penetration. While the NBFCs are impacted on liquidity, Hero Fincorp has been served well because of its right issue. So they have enough liquidity to fund their growth as of now. The finance percentage (share) is only expected to go up like they have been going up,” said a senior executive of Hero Motocorp.

Hero Motocorp’s sales rose 9 percent during April-September to 4.13 million units as per SIAM data. “The problem (of liquidity) is with large corporate loans rather than the smaller consumer loan managing 24 EMIs. This is a margin creating segment for them and we don’t foresee any problem even during the medium term”, added the Hero executive.

While NBFCs have expanded their presence in the two-wheeler sector, they have not lost ground in financing of trucks and buses. Country’s second-largest maker of trucks and buses Mahindra & Mahindrahas reported a stable share of NBFCs financing its vehicles, a top official said speaking to Moneycontrol.

“There has not been any change in finance availability for the commercial vehicle market. On the whole scrutiny level of the person availing the loan, especially lower level consumer, from banks as well, has definitely gone up but there is no problem of liquidity and there is no reluctance to lend either. Around 30-35 percent of sales are financed by NBFC (for M&M) and within that 18 percent is by Mahindra Finance and the balance by banks. This share is largely stable,” Vinod Sahay, chief executive officer, Mahindra Truck and Bus Division.

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