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MOTORINDIA
l
September 2012
105
organised financing of pre-owned
trucks with strategic presence in
5-12 year old trucks and a market
share of around 25 per cent. It has
a pan-India presence with a network
of 502 branches along with over
500 private financiers, and has built
a strong customer base of over 8.5
lakhs.
Used or pre-owned vehicles ac-
count for almost 70 per cent of the
total commercial vehicle sales in
the country. Small road transport
operators, who typically own less
than five trucks, largely control the
freight movement on road. And eve-
ryday more people join this expand-
ing group of truck entrepreneurs,
and mostly their first buy is a used
vehicle. On an average, a commer-
cial vehicle is resold three times
during its operational lifecycle of
approximately 12 years.
A major challenge faced by buy-
ers and financiers of used vehicles
is lack of established platforms for
trading such vehicles and proper as-
set valuation norms. This harbours
a perception of increased risk with
the financiers. However, an encour-
aging sign is that yields are much
higher than on new vehicle financ-
ing and the loan tenure is much less.
Also, there is room for penetration
by organised companies as the seg-
ment is currently dominated by un-
organised players.
Challenging FY12
The year 2011-12 was marked by
tightening liquidity and higher cost
of funds leading to a negative im-
pact on infrastructure investments
and deferred investment plans. But
inflation was kept under
control since October last
year, while the Reserve
Bank of India had eased its
tight monetary policy by
cutting the short-term lend-
ing rate for the first time in
more than two years.
Commercial
vehicle
sales in India increased by
18.2 per cent year-on-year
in 2011-12, but sales of medium
and heavy commercial vehicles
(M&HCVs) rose by just 7.9 per
cent as compared to 37.2 per cent
in 2010-11. This decline was on ac-
count of high interest rates on loans,
cut in industrial production and a
hike in vehicle prices. Several fleet
operators applied brake on their
expansion plans due to slowing in-
dustrial activity and tough operating
environment where freight rates re-
mained stagnant despite increasing
operating costs.
Light commercial vehicle sales,
however, increased 27.4 per cent in
2011-12, driven by increasing de-
mand from rural areas, emergence
of the hub-and-spoke model and the
need for last-mile connectivity.
Currently the Indian trucking in-
dustry is undergoing changes. In
the M&HCV segment, the share
of heavy-duty, long-haulage trucks
(16T+) is increasing on account of
improving road and highway infra-
structure as well as greater avail-
ability of such vehicles. In the LCV
goods segment, the share of sub-1T
segment is on the rise with the emer-
gence of the hub-and-spoke model
Mr. Umesh Revankar, M.D.
vehicle finance
Versatility at its best
Services offered by STFC
• Financing of pre-owned and
new commercial and passenger
vehicles, tractors, 3-wheelers,
multi-utility vehicles, etc.
• Finance for working capi-
tal, engine replacement, bill
discounting, credit cards and
tyre-loans as holistic financing
support.
• Financing of pre-owned and
new construction equipment
through Shriram Equipment Fi-
nance Ltd. (subsidiary)
• Owns, operates and man-
ages Automall, India’s first
physical auction platform for
pre-owned commercial vehicle
through Shriram Automall In-
dia Ltd. (subsidiary)
• Sale of refurbished commer-
cial vehicles through Shriram
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