Mahindra Fin banks on M&M Navistar for CV lending push

Mahindra Finance is banking on the M&M Navistar line of trucks to drive its fledgling heavy commercial vehicles (CV) financing business and aims for 20-25 per cent market share in this segment within the first year of operations.

The non-banking finance arm of tractor-to-technology giant Mahindra & Mahindra (M&M), primarily provides loans for tractors, utility vehicles and cars. It began financing heavy commercial vehicles in February this year and at present finances 1,000 vehicles per month.

“We see the upcoming launch of M&M Navistar as a big opportunity and this will help make us a significant player in the commercial vehicle finance space,” said Mahindra Finance Managing Director Ramesh Iyer. According to Iyer, commercial vehicles and construction equipment lending should make up 10-12 per cent of the firm’s loan book by the end of 2010-11. The lender’s loan book as of March 2010, was about Rs 10,000 crore.

 

M&M Navistar, the auto major’s 51:49 venture with Navistar was formed in 2005 for M&M’s foray into the medium and heavy truck segment, which has been a stronghold of Tata Motors and Ashok Leyland.

The venture will make trucks and buses ranging from 4.5 to 49 tonnes and has already announced the price of its first truck offering, the MN 25. The first batch of trucks is expected to hit the markets in the next two-three months and the company is aiming to have an overall annual production of 8,000-10,000 units a year.

“We noticed that a lot of projects beyond metro markets were absorbing these assets and customers were looking for finance for these assets. We are already financing contractors through tractors and this will drive synergies between manufacturers, the dealers and our existing network,” Iyer said.

Mahindra Finance has also applied for a license to start an asset management business and its application is in an “advanced stage” of processing, Iyer said.

The firm has also completed a pilot for loans against gold and now plans to start on a full-time basis. “We eventually want to reach annual disbursements of Rs 300 crore-500 crore in the loans against gold segment,” Iyer said.