Comments
K Ram Kumar
Having zeroed in on working capital for commercial vehicle (CV) fleet operators as a substantially unaddressed segment, Suryoday Small Finance Bank plans to introduce a cash credit/overdraft facility, ranging from ₹10 lakh to ₹1 crore, to help them meet short-term expenses.
Working capital needs
While lenders fund fleets (of commercial vehicles), the working capital needs of mid- to a little large-sized fleet operators are not fully catered to by them, said R Baskar Babu, MD and CEO, Suryoday Small Finance Bank (SSFB).
“A transporter with, say, a fleet of 10 commercial vehicles, most of the times, does not have a working capital limit. So, we see this as an opportunity...This segment is left wide open,” he said.
Currently, transporters either bring in their own working capital or resort to refinancing (vehicles that are free of finance are mortgaged/hypothecated to a lender to get a loan).
“There is a requirement for true working capital, which is overdraft (OD)/cash credit (CC). Having OD/CC is far more efficient from the interest cost perspective.
“Now, a borrower may have a term loan of ₹1.50 crore, but does not have a working capital limit of ₹20 lakh…So, as an SFB, we see this (working capital for CV fleet operators) as a good, niche segment,” explained Babu.
Now that it has a CV portfolio of about ₹120 crore, Navi Mumbai-headquartered SSFB, which commenced operations in January 2017, is planning to introduce working capital facility for CV fleet operators in the next couple of months.
The working capital facility will cater to CV fleet operators in the mid- to a little large-sized segment (not the very large operators). The working capital limit will be anywhere between ₹10 lakh and ₹1 crore.
“This (working capital) product will create more stickiness with the customer. At the moment it (funding CVs) is only transactional in nature. We fund when the customer has a requirement.
“But working capital is a continuous engagement. It creates stickiness and, hence, will enable us to also participate meaningfully in the term-loan requirements for purchasing vehicles,” explained Babu.
Deposits, advances
SSFB, which had deposits and advances of ₹997 crore and ₹2,204 crore, respectively, as of September-end 2018, is eyeing a CV portfolio of more than ₹500 crore by the end of next financial year. Currently, on an average, the bank’s CV portfolio is growing by around ₹20 crore a month. Babu expects this to be scaled up to ₹35-40 crore per month.
Comments
COMMENT NOW
Comments
Comments have to be in English, and in full sentences. They cannot be abusive or personal. Please abide by our community guidelines for posting your comments.
We have migrated to a new commenting platform. If you are already a registered user of TheHindu Businessline and logged in, you may continue to engage with our articles. If you do not have an account please register and login to post comments. Users can access their older comments by logging into their accounts on Vuukle.