BNP arm to invest Rs 400 cr in corporate vehicle management

Arval India Private Ltd (AIPL), a subsidiary of BNP Paribas, will invest Rs 400 crore over the next three years to grow its corporate vehicle management business in India.

“With over 350,000 corporate vehicles in the market, we expect to see this sector nearly double in the next five years. We expect the total managed fleet to be approximately 9,000 vehicles by the end of 2012,” AIPL Managing Director Liam Donnelly said.

The company is starting with a capital base of Rs 27.5 crore, which will be used to meet working capital requirements. It will also raise about Rs 400 crore from banks to fund vehicle purchases.

To queries on the adverse effect of the economic slowdown on the company’s business, Donnelly said, “Leasing vehicles instead of buying becomes a better proposition during trying times as firms would like to increase the proportion of cash in hand rather than locking up funds in assets.”

Arval provides vehicles — predominantly cars for senior management staff and employees transport — on operating lease, under which it takes on itself the risk on residual value and maintenance costs. With such leases, companies do not have to lock up funds in buying vehicles.

Asked about the time frame for breaking even, Donnelly said keeping in mind business parameters such as costing, the break was likely to happen only by March 2011.