No equipment group is able to drive growth which is primarily due to the fact that the overall infrastructure and mining segments have been impacted by various factors, says Sumit Mukherjee, National Sales Head, Magma Fincorp. Excerpts from the interview.
How do you navigate turbulent times and what are the measures to be taken on a war footing?
There is a need to push the clearance of key infra projects. The Ministry of Environment and Forest (MoEF) recently cleared about 80 files relating to road projects out of 347 road projects which were held up f or a long time. The highways ministry had sought some relaxation in issuance of green clearances for national highway projects to hasten construction work. At present, environment clearance comes only after forest clearances are obtained for the entire stretch.
Has the current depressed markets and lack of positive signals of a recovery led Magma to diversify into other market segments? If so, what is the potential?
Magma is already a well-diversified business with six business lines in ABF and another two business lines in Gold and Housing loans. Our mainstay ABF business is car loans, followed by agri loans, commercial vehicles, construction equipment, used machinery and SME loans. The potential in each of the product lines is large.
What has Magma's overall performance been like in 2013? To what extent has the top line and bottom line been affected?
The overall equipment sales have de-grown by 21 per cent approximately during the FY 12-13. In the last quarter of the financial year, backhoe loaders had de-grown by 15 per cent year-on-year basis and excavators had de-grown by 25 per cent. The same trend continues at the start of new FY 13 with backhoe loaders having a flat growth of 1.51 per cent in April 2013 and excavators having declined by 30 per cent which is a great cause of concern for the industry.
With the primary sales dropping in CE, CV and cars, our disbursement in these products too has witnessed a drop. However, our used, agri and SME business have grown.
In today's scenario is there any equipment segment able to drive growth?
Unfortunately no equipment group is able to drive growth which is primarily due to the fact that the overall infrastructure and mining segments have been impacted by various factors. Thus road jobs, mining (due to regulatory issues), industrial infrastructure, all segments have shown a negative trend.
What is the scenario of financing in the FTU segment?
The first time user (FTU) segment is facing severe viability issues due to rising fuel costs, high interest rates and very importantly their inability to pass on the increase in input costs through a higher hiring rate.
What are the prospects for the financing of used equipment?
We do not see a very high potential in used equipment since OEMs are giving good deals in new equipment. Hence, a prospective buyer can probably get a new machine with the same down payment which he has for old equipment. Also, the market is completely unorganised and there is no formal platform on which customers can meet for a transaction.
What could revive the future of the CE financing segment?
In my view, two measures will revive the market. The first is faster clearance of pending bills which will improve the cash flow of contractors and give them the confidence to invest in new equipment. The second, actual execution and implementation of various measures the government has announced with respect to project execution and clearances.
Is there a price war looming and how do you plan to strategise your business model in such a situation?
We do not anticipate a price war. Given the grim situation, more than disbursement, maintaining portfolio health is of importance.
Is there any move from any quarters for registration of ICE assets and getting the depreciation rate increased to 30 per cent?
We are not aware of any such concrete move. In my view, even if such a thing happens it will not trigger purchase as long as deployment is an issue.