Hero Cycles looks to sell bicycles in villages via financing

Inspired by purchases of buffaloes in villages through financing, the world's largest bicycle maker by volume Hero Cycles Ltd is looking to replicate the same for its products through micro finance firms to boost its rural sales.

The company has tied up with Allahabad-based Sonata Finance for financing bicycle purchases, under which the micro finance firm will provide loans of Rs 100 per week to customers in the rural areas.

"This is a test case. We are starting in eastern UP. Once we are successful here, then we will look to enter Andhra Pradesh with the same concept," Hero Cycles Ltd Managing Director Pankaj Munjal told PTI.

Sounding upbeat about the experiment, Munjal said: "When villagers can buy buffaloes on loan through micro finance firms, there is no reason why the same cannot be done for bicycles, which will add a lot of value to their lives".

Munjal said the idea behind financing of bicycles is to make it available within the reach of villagers whose monthly income is far less than the overall cost of the product.

"The monthly income of a villager can be as less as Rs 2,500 and in the absence of a financing scheme, he is unable to shell out over Rs 3,000 to buy a bicycle at one go. By staggering out the payment through financing, we are looking to make the product within his reach," Munjal said.

Admitting that there are risks for default, he said: "There is a delinquency fund created (to overcome it)".

Munjal said with the bicycle penetration in India as low as 18 per cent, with a total annual sales of 12.5 million units last year, there are lots of opportunities to be tapped, specially in the rural areas.

"Of our total sales of 5.3 million units last year, 65 per cent came from the rural areas and still there is a lot of potential for growth," he said.

Even as the company focuses on the rural market, Munjal, said the company will not ignore its premium segment bicycles as the segment has also been showing good growth over the years.

"We will be coming out with new range in the kids and premium segment which are in the prance range of Rs 4,000 and Rs 14,000," he said.