NBFCs\' auto loan book may grow at 15 percent till FY20: Report

作者:Fannie    發表日期:2018-09-29 11:44:18

The vehicle finance business of non-banking finance companies (NBFCs) is likely to grow at 15 percent till FY20, helped by the improving macroeconomic environment and government focus on infrastructure and rural areas, according to a report.

The report finds market opportunity for NBFCs stemming from continued government investments in roads, expected finalisation of the scrappage policy or the voluntary vehicle modernisation programme and higher budgetary spends for the rural sector.

"We expect the vehicle finance portfolio of NBFCs to grow 300 basis points (bps) faster over the three financial years to 2020, clocking a compound annual growth rate (CAGR) of 15 percent, compared to 12 per cent saw in the past three years," Crisil said in a report today.

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In terms of segments, around 85 percent of NBFCs' vehicle finance portfolio comprises commercial vehicle (CVs) and car/utility vehicle (UVs) financing. The balance includes tractor and two/three wheeler financing.

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While all the segments of vehicle finance are expected to grow faster than before, commercial vehicle financing, which constitutes 51 percent of the vehicle finance portfolio of NBFCs, is expected to rebound from the lows seen over the past several years.

Crisil expects the commercial vehicle financing segment to clock a CAGR of 14 percent till 2020, on account of which NBFCs would retain their share of over 65 percent in the overall CV finance market.

"Light commercial vehicle finance will steer this growth as the hub and spoke logistics model gains traction after GST, but the shift to higher tonnage vehicles will also prop medium and heavy commercial vehicle (M&HCV) financing," the report said.

The other major segment, cars and UV financing, which constitutes 34 percent of the overall NBFC vehicle finance portfolio, is expected to clock a CAGR of 18 percent over the next three financial years, due to increasing disposable incomes, growing preference for higher-value UVs and improving penetration of formal finance, according to Crisil.

The agency, however, expects NBFCs to face structural challenges such as the overhang of the GST implementation, impact of the dedicated freight corridors coming up in the West and East, and the cost of transition to BS-VI engines.

"Additionally, intensifying competition from private sector banks, which are aggressively chasing retail assets and public sector banks clawing back into contention after recapitalisation is a reality," the report concludes.