NBFC auto loans hit new high in first half of fiscal 22, but problems persist, Auto News, ET Auto

Although the outlook on the disbursement front appears to be under pressure, financiers expect the repayment cycle to pick up.

New Delhi: As an indication of improving feelings, more and more people in the country are borrowing to buy new vehicles. With the resumption of economic activities and increasing demand and freight rates, new auto loan disbursements by non-bank financial corporations (NBFCs) nearly touched pre-COVID levels in the first half of this year. ‘exercise 22.

Data provided by the Finance Industry Development Council (FIDC) shows that in the first half of FY22, loans worth INR 63,669.84 crore were disbursed to the automotive sector, compared to 43,564.77 crore. INR over the same period a year ago, up 46.15%. A sequential reduction in gross NPA was also observed from quarter to quarter.

Bajaj Finance and Mahindra Financial Services (MFSL), the two largest NBFCs in the automotive segment, reported a decline of about 3% each in their gross APM in the three months ending September, quarter on quarter.

Amount sanctioned (Cr)
Type of lender S1 FY21 S1 FY22 % Switch
Automatic loan 391.32 619.11 58%
Auto Loan (Personal) 12,753.02 21,444.41 68%
Commercial vehicle 16,714.23 26,184.35 57%
Two wheels 9,902.26 11 935.28 20.50%
Construction equipment 3,803.94 3 486.69 -8.30%
Total 43,564.77 63,669.84 46.15%

Source: FIDC

The rural rebound in July-September was one of the main factors supporting credit growth. The prolonged monsoons and the rise of the MSP in the latter part of the first half of the year improved liquidity in the hinterland, which is an important market for commercial vehicles (CVs), followed by three-wheelers and two-wheelers. ‘entry level.

Notably, around 70% of new CVs, 80% of three-wheelers and 45% of two-wheelers are purchased on credit in India.

According to Umesh Revankar, MD and CEO of Shriram Transport, the MSP on various crops which has been increased from 2% to 8% has helped the rural economy gain momentum. CV sales were 166,251 units in the second quarter of FY22, close to 167,173 in the second quarter of FY20, he said.

“Higher fleet utilization, increased cement and steel consumption, infrastructure development and road construction were all positive indicators,” Revankar said on a call after the results earlier this year. this month.

On a related note, Ramesh Iyer, MD, Mahindra & Mahindra Financial Services, said the rural market fell to a very low level after the second wave, but as things started to open up they were falling. are repelled. “Most of the customer segments we work with, vehicle, tractor and three-wheeler, are all paid and paid segments. And with the return of activities in the rural market, we have seen a rebound in our customer segment, ”he said. noted.

Perspectives

Despite impressive growth and high customer traffic at dealerships, NBFCs are skeptical about maintaining the same pace for the remainder of the year due to the slowdown in the supply chain. The current global shortage of chips has created an unpredictable waiting period, especially in the passenger vehicle segment where nearly 50% to 55% of new cars are financed by micro-financiers.

Iyer said supply remains a constraint, but not demand. “And therefore, we think as the vehicles start to become available, we will also see more pull on the disbursement side as demand holds,” he added.

..we believe that as vehicles start to become available we will also see more pull on the disbursement side as demand holds.Ramesh iyer

At the industry level, OEMs expect their production and supply to improve over the next three to six months.

Auto Major Mahindra and Mahindra said earlier this month that they expect the semiconductor shortage to persist in 2022, but with less severity. NBFCs believe that as the supply begins to improve, the microfinance industry will also begin to expand in all segments, and old and new alike will fare better.

In addition, the increase in outstanding loans due to the larger size of the notes is also a looming concern. With rising vehicle prices, due to commodity price inflation and BS-VI regulations, the amount of auto loans has jumped over 20% in the past five years. The average size of vehicle loan tickets increased to INR 5.43 lakh in FY21, from INR 4.5 lakh in FY16.

Although the outlook on the disbursement front appears to be under pressure, financiers expect the repayment cycle to pick up.

In general, the collections in the second half are better than those in the first half, mainly because it is harvest season and people have money. “Normally we tend to have more than 100% collection in the second half of the year. So we expect the collections to improve,” Revankar said.

Agriculture is a sector of opportunity and resilience. “If we are prepared to take a granular view of this sector in terms of multiple states, districts, PINs, agro-climatic zones, etc., rather than a holistic approach, we believe this will remain the sector of opportunity for decades come, ”Sunil Prabhune, Managing Director, Rural Finance and Group Leader, Digital, IT and Analytics, L&T Financial Services told ETAuto.

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