"We have a focus across the board starting from primary equipment to high end machinery. Our bouquet of offerings includes funding of new assets, refinance against old equipment to meet short-term capital requirements and Letter of Credit for customised/imported equipment," informs Mr. Sumit Mukherjee, Vice President of Magma Fincorp Limited, in an interview with S.D. Khan.
With a planned investment of $1 trillion in the next five years plan 2012-17, how do you see the construction equipment market growth in the coming years?
This $1 trillion story is doing the rounds for a long time but in fact, there are still some loopholes that need to be plugged. The road sector is still not so active and project awards need to be ramped up and execution agencies extended a single window clearance to ensure timely execution. Talking of market growth, the future looks bright since the infrastructure in the country is underdeveloped and we need to invest in basic infrastructure like roads, urban infrastructure, irrigation etc which are a necessity. Another important sector which will drive equipment sales is coal mining.
A good sign is the entry of new CE manufacturers into the country and existing players who have invested in building their own manufacturing base. If all the plans that are on the drawing board are started then we would see at-least a 25% YOY growth for the industry in the next 5 to 10 years.
On which CE segment is Magma focused? What is the company's share in the CE finance market?
We have a focus across the board starting from primary equipment to high-end machinery. Our bouquet of offerings includes funding of new assets, refinance against old equipment to meet short-term capital requirements and Letter of Credit for customized/imported equipment. The finance market for standard equipment ranges from Rs.16,000-18,000 crores and we are placed between 9-11% of market share.
A word about the company's USP and how it caters to the customers?
We have special tie-ups with all the major manufacturers which enable us to provide the most lucrative schemes and options to our customers. Our structured lending programme is based on well-defined customer selection criteria where both the first time buyer and the strategic customer are considered. We operate through close to 200 branches which covers all the important clusters. Being able to connect with the customers through our countrywide presence, we are able to offer them continuous support. For instance, EMIs are serviced from a customer's doorstep and he gets an automated receipt.
Why is NBFC a more preferred option for financing as compared to a bank?
Well, a customer is normally concerned about three things: speed, cost and amount being financed. NBFC addresses all these concerns in a more appropriate way for example Magma has the ability to assess the risk and thereby underwrite a first time buyer who does not have any credit history or financials. We generally turnaround a FTB deal and give a decision / approval within 4 to 5 days. Our lending rates are benchmarked against the best players in the market and so are our LTV's. Of our total lending approximately 40% is to first time buyers.
What are the current challenges in the CE financing market?
Some of the current challenges are the rising interest rates and increasing fuel prices. The hiring rates have remained unchanged in the last 12 months and equipment owners are finding it increasingly difficult to pass on the increase in input price. Any further increase in interest or diesel rates would have an adverse impact on equipment sales.
How do you judge Excon 2011?
It was a wonderful melting pot of the CE industry that helped us in interacting with a considerable chunk of customers. We were able to rope in more clients and did inform potential clients and financing partners about our offerings. The future editions of Excon will certainly witness more growth and participation.