Rural demand for auto loans still high, says M&M Financial

Ramesh Iyer - MD, M&M Fin.

Even as auto companies are struggling with falling output and declining demand across the nation, demand for automobile loans still seems to be stronger in the rural areas, claimed Ramesh Iyer, MD of Mahindra & Mahindra Financial Services in an interview with CNBC-TV18 today.

"I think even though the overall auto market seems to be flat or taking dip but the rural market seems to be contributing to the growth," Iyer said.

The non-banking finance company had clocked 21% disbursement growth for the nine-month period ended on December 2012 from a year ago, maintaining its strong position for vehicles and tractors in the rural and semi-urban markets.

M&M Financial gets major chunk of its business from vehicles of two leading auto companies Mahindra and Mahindra and Maruti Suzuki. Iyer said recent entry of other players in the rural market also helped the company to get a strong growth.

"Today if you look at it, every manufacturer has entered the market through their channel, whether it is Hyundai, Tata cars, Toyota. All kinds of products are also getting sold in that market. As a player who has got this deeper reach becomes an automatic enabler for all these people who look at that (rural) market," Iyer explained.

Another thing that has helped the company is the tracking of its customers in more than 1,65,000 villages. "We use them as our channel to develop more direct business in those markets," Iyer said. 

Mahindra & Mahindra's Bolero, Tata Motors' Ace and Magic Iris are some of the popular models selling in rural India. Small commercial trucks also have a good traction in villages, tier II and tier III cities.

M&M Financial registered a volume of 46,000 vehicles in January and February this year. The company is confident of maintaining this volumes even going forward despite the current lull in the auto segment. The company has about 20-25 percent market share for automobiles loans in case of Mahindra and Mahindra vehicles, while it has 8-9 percent market share in case of Maruti Suzuki.

"Those market shares are not challenged by any method even if the volumes were to be flat. We believe that little increase to our market share with additional branches opened is what is protecting our growth further," Iyer noted.