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LCV, tractor demand picks up but HCVs in slow lane: M&M Financial Services

finance | Jan 11, 2022 12:11 PM IST

LCV, tractor demand picks up but HCVs in slow lane: M&M Financial Services

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Ramesh Iyer, VC and MD of Mahindra & Mahindra Financial Services, on Tuesday, affirmed that the on-ground demand sentiment remains positive. He explained that among categories, light commercial vehicles (LCVs), tractors and pre-owned vehicles are seeing a high demand, however heavy commercial vehicles (HCVs) are yet to see a pick-up.

Ramesh Iyer, VC and MD of Mahindra & Mahindra Financial Services, on Tuesday, affirmed that the on-ground demand sentiment remains positive. He mentioned that he is witnessing a high uptick among new customers. He explained that among categories, light commercial vehicles (LCVs), tractors and pre-owned vehicles are seeing a high demand, however heavy commercial vehicles (HCVs) are yet to see a pick-up. He attributes the primary reason of low HCV demand to individual owners.

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"On the ground, sentiment remains positive. Clearly the demand is high and we see a lot of new customers coming in and wanting to buy vehicles, so clearly the way forward seems very positive. And if the vehicle availability starts to improve, which we do believe will happen, you can even see pick-up of overall volumes and disbursement," he said.
"From an overall demand perspective, at least from where we participate, we clearly see demand pick-up for a range of vehicles, LCVs, tractors, commercial use, pre-owned vehicle space is very active, at least when it comes to cars and utility vehicles (UVs). Heavy commercial vehicle (HCV), we don't see people coming to buy yet," Iyer added.
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In regard to HCVs, Iyer clarified that HCVs do not form a big part of their orderbook. Additionally, he expects demand from contracting segment to pick up for tractors as well.
"We are not a very strong heavy commercial vehicle financial. If you look at our book, it's a very small book from heavy commercial vehicle segment. Going forward, you will start seeing the tractor build-up also happen. I'm very hopeful that the contracting segment of tractor purchases are yet to begin and I would think that it would start to happen now," he said.
On collection efficiencies, Iyer mentioned that it was good in Q2. Collection efficiency was at 100 percent in the month of December and at 95 percent plus in the balance months of Q2. He believes as collection efficiency sees an improvement, the non-performing asset (NPA) build-up will go down. Iyer explained that the gross non-performing assets (GNPAs) will reverse, going ahead. He clarified that the NPA build-up in Q1 was purely circumstantial.
He said, "We have clocked 100 percent collection efficiency in December and upward of 95 plus in the other two months. So therefore, collection efficiency is holding up. The NPA build-up in Q1 was more circumstantial and not intention of the customers not to pay."
"As they start to earn, they have started paying and we definitely hold that view that as collections hold up in the fashion that you saw in the second and third quarter, the reversals of gross NPAs will also happen in the same direction," he explained.
Watch the accompanying video for the full interview.
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