The Hindu Business Line : `Apeejay Finance eyes Rs 200-cr disbursements by fiscal end'

Business Line caught up with Mr Sarvadaman Ray, Whole-time Director, who spoke on the changes in financing business and on the company's financial plans.

Excerpts from an interview.

How has your company grown in recent times?

Business for us has been growing at a compounded rate of more than 20 per cent for the last five years or so. The rate of growth, we feel, will be sustained over the next few years. The growth is being driven by large volumes, thanks to the manifold increase in the number of automobiles that are being bought and sold. Other changes, such as migration from two to four-wheelers, are also boosting the growth of companies like ours.

What are your projections for disbursements in 2003-04?

We hope to disburse Rs 200 crore by the end of this fiscal. Last year, we disbursed around Rs 130 crore. Let me add here that our average cost of funds is coming down. A good part of the new business that is expected to be generated should stem from the southern States. The market there is expanding very rapidly, a trend that is evident from the numbers that are being clocked by our Bangalore and Chennai offices. Incidentally, we are trying to penetrate some territories that are newly emerging as potential business bases. A few small towns in West Bengal, the ones like Kharagpur, for instance, feature in this list.

How is the auto finance sector changing?

In a word, the changes are stupendous. The sector has changed beyond recognition, courtesy easy availability of finance. In the background are the overseas auto majors who have set up shop in India and the domestic producers who are coping with competition from their foreign counterparts quite smartly.

In fact, 99 per cent of all cars sold in India today are funded by some financing agency or the other.

India has actually warmed up to the idea that vehicles are a necessity and no more a luxury. It will not be improper to suggest that it is the auto finance industry that is driving the auto manufacturing set-up and not the other way round. A number of big players, including a few major banks, have come to dominate the financing arena. I am referring to the likes of ICICI, Citi or ABN Amro. On another front, marketing programmes are becoming more sophisticated and customer-oriented. Networking is also getting outsourced.

Will this realignment make things any different for you?

As financiers we have already appreciated the fact that new realities must be faced. It is now a greatly commoditised business. Few niche financiers or boutiques will do well in this situation.

For the others, factors like speed of delivery are fast becoming important. A client looks for speedy and efficient service; fail him or her on this count, and your business will go elsewhere.

Interestingly, the market for us seems to be getting divided between retail and wholesale lines.

It is perhaps possible that in a few years Apeejay will mainly emerge as a key retail player, operating in an environment where wholesale players have stopped investing in ground-level infrastructure and instead concentrate on buying out retail portfolios.

There are tie-ups in terms of securitisation that is happening between financiers and auto manufacturers. Even the used car market is getting used to brands.

Will floating rates become significant here as well?

Floating rates, I am very sure, will emerge as a critical element in our industry, and this, in a situation where interest rates are coming down fast.

Floating rates have already happened in the housing finance segment.

Ours will be no exception. However, it may still take some time to attain popularity.

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