K. Vasumathi Devi, Managing Director at IKF Finance reveals the details about the commercial finance business in India, technology partners & innovations:
Ravi Lalwani: What is the growth rate for commercial vehicle finance in the last 12 months?
K. Vasumathi Devi: There is a robust growth in commercial vehicle disbursements and has registered a growth of around 85% during the last 12 months, i.e. Dec ‘21 to Nov ’22, when compared with the corresponding period of Dec ‘20 – Nov ‘21. Likewise, the growth in commercial vehicle disbursements has registered a growth of around 144% on a year-to-date basis, i.e. Apr‘22 to Nov‘22 when compared with the corresponding period of Apr‘21 to Nov’21.
Further, IKF has started accessing the new commercial vehicle space by focusing on small and light commercial vehicles. Though the corresponding period numbers are constrained due to the second covid wave, disbursements have improved considerably even when compared with pre-covid numbers on account of overall improvement in the economic conditions, stabilized fuel prices and pent-up demand, despite hardening of interest rates. This growth trajectory is expected to continue, given the improvement in the macroeconomic environment, replacement cycle, and healthy demand from the end-user industries.
Which are the top 3 states for the IKF’s commercial vehicle finance business? Which 3 states have shown the fastest growth?
Gujarat, Tamil Nadu and Telangana have contributed significantly, constituting more than 50% of the total CV disbursements in the last 12 months, i.e. Dec‘21 – Nov‘22. Besides, Maharashtra also has contributed considerably during the current financial year. Rajasthan, Madhya Pradesh and Gujarat are the fastest-growing states this year in percentage terms.
What is the size of the commercial vehicle finance in FY ‘23? How has this ratio changed over the last few years? And what is IKF’s contribution to it?
The Indian commercial vehicle market size is over Rs1.6 trillion and is set to log growth for the next couple of years with the economy reviving and the covid-19 pandemic almost fading away. As per industry experts and rating agencies, the CV industry is poised to register a growth of over 20% in FY 2023.
During the current fiscal, the CV majors are logging good growth driven mostly by goods carriers while the sales of buses are also picking up and the sector is expected to maintain its uptrend, supported by improved freight availability. A rapid recovery in India’s economic activity after the pandemic shock and the government’s planned increase in infrastructure spending will help sustain an improvement in fleet utilization rates, supporting freight economics for operators backed by the revival of the replacement cycle, notwithstanding pressure from high inflation and a rise in borrowing rates since the start of the Russia-Ukraine war. Improving earnings visibility for fleet operators, along with manageable asset quality and funding access for lenders, should support credit availability.
What new data points have been introduced from the perspective of business & risk?
IKF has automated the whole process from loan login, customer credentials verification, product verification, underwriting, disbursements, collection, etc, to expedite the process and to minimize human intervention in the underwriting while ensuring multiple checks to weed out the bad customers.
From a business and risk perspective, we have introduced LOS which has a structured flow right from the customer’s POC. The RM checks the bureau of the customer and decides whether the case is fundable or not. They move to the next level where the KYC online verification of the customers is done. Subsequently verifying the online vehicle database by connecting with the Vaahan repository to know the genuineness of the proposed asset. Two independent references on the customer are taken by the RM. Independent external field investigation is carried out at the customer’s residence & office which is in addition to our RM meeting the customer personally. Additionally, an external valuation of the vehicle is initiated to have an independent view of the current price of the proposed asset. Following the process through the system enables us to weed out the bad customers which help manage the asset, documentation, operational, and various other risks.
Who are the key technology partners associated with IKF Finance?
We have partnered with LBIT Labs, a company based out of Hyderabad, for our loan originations. This enables us to reduce the enormous amount of TAT for onboarding the customer. We have a partner’s web application that enables the partners to refer leads, know the status of the case, Upload PDDs, and claim payout.
We are also partnered with Digio for customer KYC online verifications for PAN, passport, driving license, etc. One for online vehicle registration verification, we work with Probe42 for comprehensive customer data for quick analysis, with Score for bank statements evaluation, with Digio for eMandata registrations, and with Razorpay for payments.
Briefly describe recent innovations in the internal and external operations.
Grid values are being updated more frequently to keep offerings matching with the market. Credit grids were made dynamic to facilitate market needs and changes quickly without compromising on risk. Assessment-based funding is encouraged for CVs as the asset is a breadwinner to many of the customers who started to tie up with bulk transporters who wanted to offload their old vehicles to their known drivers who want to move from driver to owner. Funding happens here based on strong references and financially strong transporter comfort. A simplified and quick disbursement process has been laid out to ease CV business and reduce TAT drastically to 6 hours. Pre-approved loans have been given to all existing good customers which help to get the required working capital easily. Made documentation of this product very simple and hassle-free
Please briefly describe the division and team that handles commercial vehicle finance.
A new vertical for new SCV has been created and complete focus will be ensured on this product. More talent acquisition has been done from the CV finance industry, particularly at the branch manager level, and able to create more contact and distribution points at the local level. Area managers under state head and sales managers under branch managers are employed to bring in complete focus on CV business. CV business is more relationship-driven business and people who have the strong local market knowledge and connections have been onboarded. Emphasis is given to people who know basic viability and understand market dynamics as a CV being an earning asset experience plays a bigger role. The financial statements tele calling teams have been set up to generate inquiries from the available database and cold calling which is yielding good results.