Commercial vehicle (CV) financing is expected to grow from the fourth quarter of this financial year on the back of firming of freight rates, improved capacity utilisation and orders from the industry, according to Romesh Sobti, MD & CEO, IndusInd Bank.
He sees a cyclical uptick in CV financing. All the vectors that suggest demand will pick up are positive, he said.
“So there are many criteria: One is the manufacturers’ data which shows the production is going up. Some manufacturers say their orders are booked for the next six months. Therefore, there is good release of orders for buses, trucks, etc,” Sobti said.
As of June end 2014, the consumer finance division accounted for about 43 per cent (or ₹25,364 crore) of its total loan book as compared to 49 per cent in FY13. Of this, vehicle financing was at about 36 per cent and CV segment is at 16 per cent of the total book.
Consumer finance division includes loans to small CVs, utility vehicles, two-wheeler loans, car loans, commercial equipment financing, loan against property and credit cards.
Downturn The CV segment across the industry saw a downturn for almost two years. Sobti said such cycles take place once in 4-5 years. However, this time, it has been prolonged.
Industry has also seen the number of days a typical small road transport operator uses vehicles going up. “All this suggests that demand is reviving. We hope this will soon translate into our lending books. The second quarter is always a weak quarter due to monsoons and during September-end people generally don’t buy. So, we hope there will be demand in our lending (book) from fourth quarter onwards,” he added.
The IndusInd bank chief dubbed the perception that the bank’s balance sheet is concentrated in CV loans as a “myth”.
“We finance anything on wheels, which is from 2 to 16 wheelers. This includes heavy-, small- , medium-CVs, off the road vehicles, construction equipment vehicles,” he said.
At present, the bank has over 2 million customers and the vehicle financing is split into personal product and commercial product.
Our balance sheet of non-vehicle retail — including loan against property, small-business banking, credit card segment — is also about ₹7,000-8,000 crore and will be about ₹12,000 crore by the end of the and maybe ₹20,000 crore in the next year.