Sumit Chhazed, Co-founder, OTO Capital, credits the three years of experience that he got running CredR, a platform to buy back used two-wheelers, for starting OTO Capital. He ran CredR from 2014 to 2017 and did more than 75,000 transactions on the platform. There were three major insights he got, he says. One, people were changing their vehicles much earlier than before.

Against six years for cars and four-five years for two-wheelers a decade ago, Sumit says, on an average, owners were changing cars every four years and two-wheelers in three-four years. Two, more consumers were opting for loans to finance their vehicle purchase. Three, vehicle owners want instant gratification and do not want to go through the hassles associated with ownership – routine maintenance, insurance and re-sale. They would ideally like someone else to take care of these routine issues.

The trigger point

That was the trigger for Sumit’s next business idea. Was there a solution for consumers who wanted to own a vehicle, go in for financing and not be worried about issues such as insurance, periodic maintenance and selling the vehicle when they wanted to? There was none, says Sumit. All that was available was the regular financing options from banks and non-banking finance companies; the vehicle owners had to renew the insurance annually and selling it after a couple of years was again their headache. “That is when we came up with OTO Capital, which is the most affordable and flexible way of financing and owning a vehicle,” says Sumit. OTO Capital has tied up with dealerships of a few manufacturers. So, when you as a customer walk into a showroom and choose a bike, you either go in for a regular financing model from banks or NBFCs, where after the documentation, your loan is approved and you take possession of the vehicle, paying a monthly instalment for the tenure of the loan. The interest is also agreed upon. The loan can be for three or five years, depending on what you choose and what the financier agrees upon. Normally, you will have to pay a percentage of the two-wheeler’s cost upfront and the balance, say, 80 per cent of the cost will be the loan amount. So, if you are taking a loan of ₹70,000, your repayment will be scheduled over 3-5 years, depending on the loan period.





The other option, says Sumit, is to choose OTO Capital’s scheme. Here again, you choose the vehicle, select the financier and instead of paying for ₹70,000, you will pay only for ₹35,000 in an OMI – OTO Monthly Instalment. The OMI, says Sumit, will cover the cost of the vehicle, insurance, maintenance. The lower loan amount is because at the end of the three-year period, OTO Capital will buy back your vehicle. Or, if you want, the loan period can be extended.

The advantages of this, according to Sumit, are that instead of paying a lumpsum amount annually towards insurance, you pay a small amount monthly so that it doesn’t pinch your pocket. Since, you are paying a monthly maintenance amount, there is no out-of-pocket expenses when the need arises. “The full journey has been digitised. When a customer walks into a showroom, he can enquire about the OTO plan, do the KYC through our app, he will get instant credit approval and can sign the agreement digitally. Within half an hour, he can close the booking,” says Sumit.

Once the technology was ready, OTO launched operations in October 2018. OTO started with financing cars and now does two-wheelers also. It launched operations in Mumbai and has now started in Bengaluru. It will enter Pune, Hyderabad and Delhi in a phased manner and also cater to different categories of vehicles.

According to Sumit, from doing 10 transactions a month, OTO is now doing 100-150 transactions a month and hopes to get to 1,000 in the next six months. The money it raised from Prime will be used to grow the team, scale operations and build capital lines with banks.

Sources of income

He says OTO has three sources of income. The first is the interest arbitrage. Number two, it makes money on the insurance and maintenance businesses, through commissions. Third, is the resale margin it will make on the vehicles. OTO Capital, says Sumit, uses an IoT device to track how the vehicle is used. This device is fixed to the vehicle’s OBD (On-board Diagnostics) port with the customer’s consent and using proprietary analytics helps track how the vehicle is driven, which will enable OTO to inform the customers of where they can improve their driving.

What does OTO mean? “Generally,” says Sumit, “I keep names more on philosophy. So, CredR was named because it stood for Credible Resale.” OTO, he adds, comes from Ownership Together. “The concept is about we are owning it together. You own it for some time and you give it back.”