Lucrative Tractor Financing Lures Banks, Nbfcs

Leading banks and non-bank finance companies are trying to focus on tractor financing, with the truck finance business showing no signs of revival.

HDFC Bank, ICICI Securities and Cholamadalam Finance, it is learnt, are now in talks with leading tractor manufacturers to tie-up finance schemes. In the entire automobile sector, tractors - along with two-wheelers - are the only segment where there has been encouraging growth. According to estimates, the tractor industry as a whole grew by 15 per cent in 97-98.

With the agricultural output expected to be maintained at last years levels for the two main crops - wheat and paddy - demand and sale of tractors are expected to remain buoyant in the coming years. Hence, the attraction to finance tractor purchases for banks and NBFCs.

 

For banks, loans given for tractor purchase can be refinanced through National Bank for Agricultural and Rural Development (Nabard), and thus are almost risk-free. NBFCs, at the moment, are not entitled for this facility but are demanding the same.

Still, tractor finance is considered very attractive as defaults on repayments is even lower than in the truck business in the South, banking sources say. Also, in volume terms, tractors sell in fewer numbers than trucks and can be easily tracked.

Eicher Tractors, a division of Eicher Ltd, is making a careful and studied entry into Tamil Nadu this year, home turf for market leaders TAFE and Mahindra and Mahindra. The company, a late entrant to the southern market, comes to the state with a mid-segment wetland-version tractor that is being competitively priced as an entry strategy in a tough market.

While we do not want to be perceived as a cheap product, the tractor will be very attractively priced compared to similar products on offer by our competitors, says Vaitheeswaran, general manager marketing, Eicher Tractors.

Although the entry will be in the 35-61 HP segment, Eicher will eventually position itself with tractors in every segment from 24 HP to 75 HP says R C Jain, managing director, Eicher Tractors Ltd.

This year, the company plans to sell 1,000 tractors and increase its market share in the southern region to 15 per cent in three years. Now it has a 3 per cent market share in Karnataka and 5 per cent in Andhra Pradesh.