 "Santosh Aiyer, managing director, Volvo Asset Finance")
Volvo Financial, the finance arm of Volvo, the third-largest truck firm in the country, has been in India for around six months. The company sees the truck sector witnessing a demand recovery, first in mining and subsequently in other sectors. Truck aggregators, modelled on taxi-hailing apps such as Ola and Uber, are disrupting even the logistics industry, says Santosh Aiyer, managing director, Volvo Asset Finance in an interview. Edited Excerpts:
Is growth in the commercial vehicle business returning? Which are the sectors that you are seeing the pickup in truck demand?
In the heavy commercial vehicle sector, the demand has come back. We expect the medium and light duty vehicles to follow. In 2016, there should be good pickup in all the segments. Mining has come back, there was lot of pent up demand. Construction is following, not exactly in the same pace. It will pick up very soon
In manufacturing, are you seeing growth in freight movement. What are your customers seeing?
We are seeing the mining sector picking strongly. In manufacturing, there are a lot of initiatives by the government and private players. They are saying that they will see a more positive trend in 2016.
Volvo is also in construction equipment. Are you seeing construction picking?
It is tied to the economy. As the economy picks up, construction also picks up. The very fact mining has picked up is I think a lead indicator. Construction will also pick up smartly. We have seen that picking up in the last six months.
What is your portfolio size?
Volvo Financial Services was launched last year. So, as of now, we have financed about Rs 100 crore in that last six months. But given that we are seeing good pick up in the business, we expect to close 2016 with about Rs 400-500 crore in financing.
What are the challenges for growth?
The last three years have been pretty tough for the heavy and medium commercial vehicles. We can see more opportunity now. India's business infrastructure on CIBIL, amount of information that is available of customers today cannot be compared even five years ago.
With the kind of information you have today, the regulatory mechanism and the legal enforcement is so much better. There is tremendous opportunity for an NBFC to finance trucks and construction equipment. The challenges in this industry have been always delinquencies. I think those challenges are becoming lesser as the market becomes more mature.
Are we seeing the retail segment consolidate with truck aggregators?
There are people taking private equity funds and other such startup VC funds; they are aggregating lots of logistics requirement. Yes, retail will remain, but I think the emergence of these players, who aggregate fleets in the retail segments will play a role. Apart from the fleet owners, there are segments they can't be exactly classified retail, people who are working with e-commerce companies and large retailers who want to outsource the logistics functions. It is an emerging area. E-commerce in a way is pushing demand for heavy duty and medium duty trucks.
