Shriram group to expand its automall business in big way

Company said that the response from customers - mainly small truck operators - is encouraging and last year alone transactions for around one lakh vehicles valued at about Rs 1,500 cr were conducted through this platform

Shriram Automall India Limited (SAMIL) - a subsidiary of Shriram Transport Finance Company Limited, India's largest asset finance company - has big plans for the 'automalls' that it launched in 2011, which provide small truck operators with a trading platform to motivate them to replace their old trucks faster.

The company said that the response from customers - mainly small truck operators - is encouraging and last year alone transactions for around one lakh vehicles valued at about Rs 1,500 crore were conducted through this platform. The company has drawn up an aggressive expansion plan and said it will soon start handling two-wheelers also.

To support the plan of increasing the SME segment's contribution to the business from the current 35 per cent to 60 per cent over the next few years, SAMIL is planning to increase the number of automalls from 34 at present to 60 by the end of the current fiscal year, and to 100 in three years.

"We are expecting around 50 per cent growth in transactions over the next three years," said Sameer Malhotra, chief executive officer of SAMIL.

The SME segment (including truck owners having up to five vehicles and small retailers) currently contributes around 35 per cent of the business, while the balance is from banks, dealers and original equipment manufacturers. "Over the next few years we want to take the SME segment's contribution to around 60 per cent," said Malhotra.

Traditionally, small truck owners rely on the unorganised sector, where not only is transparency an issue, but customers are often taken for granted. The second-hand sales market is currently estimated at Rs 1-1.2 lakh crore.

Of this around Rs 30,000 crore comes from trucks, Rs 15,000 crore from construction, Rs 15,000 crore from tractors and the balance from cars and two-wheelers. A major chunk of this business is in the hands of the unorganised sector. To tap this market, the group decided in 2011 to set up Automall, which incorporates all the elements of a physical bidding platform.

The aim is to facilitate the most professional form of trade. Every Automall accommodates a large ground for inventory display, a bidding hall and an office. The physical bidding platform offers bidders an opportunity to inspect used vehicles and equipment and verify their actual condition.

Shriram's Automall serves customers through structured bidding platforms for used vehicles and equipment. It is a transparent model that allows buyers to test and inspect used vehicles and equipment, and thus helps eliminate the risks involved in such purchases, said Malhotra.

With information about the second-hand vehicles, prospective bidders are also offered information on price trends. Physical bidding offers scope for networking, as various traders participate in the event and share information on market trends. More than 100 physical bidding events in over 100 locations take place across India, resulting in sales of more than 6,000 vehicles every month.

In 2013-14, bids were placed for one lakh vehicles worth Rs 1,500 crore, up from 60,000 vehicles worth Rs 850 crore in 2012-13. Of the total, commercial vehicles like trucks and light commercial vehicles account for 50 per cent, passenger cars for 25 per cent, and agricultural equipment (including tractors) and construction equipment for 10 per cent each, while others account for five per cent.

Shriram Transport Finance Company Limited is the flagship company of the Rs 60,000 crore Shriram Group, which has a presence in consumer finance, life insurance, general insurance, stockbroking and distribution businesses. The Group's major focus is SMEs. Established in 1979, Shriram Transport is today the largest asset-financing NBFC in the country and a finance provider for the commercial vehicle industry.