Volvo Financial Services to promote the Volvo Group's businesses in India

Dr O P Agarwal


In a major bid to enhance its business presence, Volvo Group has very recently launched its captive Volvo Financial Services (VFS) in India. Backed with a paid up capital of $50 million, following RBI approval in August 2015, the fully owned, non-banking, captive financing subsidiary will directly finance the entire portfolio of Volvo Group products in India. Financing will be offered by the newly formed entity, Volvo Asset Finance India Private Limited, under three different brands: Volvo Financial Services, Eicher Financial Services, and SDLG Financial Services. The subsidiary will finance the entire portfolio of the Volvo Group's product range in India comprising Eicher trucks and buses, Volvo CE products, Volvo Trucks, Volvo Buses, and SDLG wheel loaders. Following its inception in India, the first initiative of Volvo Financial Services has been financing the Volvo Group's newly launched 75 tons tracked excavator for BGR Mining India. Speaking to Mr. Scott Rafkin, EVP & President, Volvo Financial Services, Mr. John Rakocy, President, Volvo Financial Services, Region Asia Pacific, and Mr. Santosh Aiyer, Managing Director, Volvo Asset Finance India Pvt. Ltd. during the launch of the services, P. P. Basistha tried to understand the financing avenues of the non-banking entity and the yardsticks of financing the equipment in India.

Please provide a brief overview of Volvo Financial Services operation globally and the instrumental role you perceive, it will play in India to promote Volvo Group's businesses.
VFS is a fully-owned captive finance arm of the Volvo Group to support sales and to grow its business across continents with the Volvo Group's presence. VFS has customer financing in forty four countries across US, Europe, Middle East, and Asia Pacific region. The Volvo Group has a strong presence with over 36,000 units in Asia Pacific region. The entity is the fourth largest equipment finance leasing company in the US. VFS has played an important role to grow the Volvo Group's business in these regions backed by tailor made flexible financial packages, suiting varied customer requirements.

With customers continuing to increase their business association with the Volvo Group in India, the financing arm will look for business opportunities and look to support customers through its global expertise to work on flexible packages to support the equipment across its total life and business cycle. The support will be rendered through our dealers in India based in Delhi-NCR, Bangalore, Hyderabad, Chennai, Ahmedabad with expansions planned in near future.

Volvo Group is planning to increase business presence in India through range of equipment support initiatives for the customers. One of the focused areas of the Volvo Group is to remanufacture and enable customers to maximize utilization of the equipment across the lifecycle. What will be the scope of services of VFS covering same?
Now, we will focus only on financing new equipment, and will consider supporting remanufactured units in a major way in near future. We may also consider financing second hand equipment as well.

Inconsistent cash flow is currently a major constraint with the Indian contractors to own equipment. The projects are getting fragmented into packages in India, leading to the deployment of equipment for a shorter period precisely with rental companies. How will your financial packages be tailored in India to meet such growing requirements?
VFS works on different approaches for individual market according to the requirements of the equipment owners depending on the project needs. There are certain unique processes followed by our financing entity to tailor make the packages backed by VFS' global expertise. However, on a macro level, prior disbursement of finance, we will see the complete tenure of the projects. On the contractor's side, historical information about the ability of the contractors to pay the debt, will be evaluated. Factors like the ability of the contactor to generate sufficient cash across the project cycle to repay the loan will also be evaluated before the disbursement of the finance.

To ensure the deployment of the equipment is financially viable for the contractors or the rental companies, we will see the scope of the project and evaluate the suitability of the application of the equipment to be financed in the projects. This will be to ensure that the deployment of the equipment does not become major commercial liability for the owners across the entire project cycle. Factors, like the ability of contractors to transfer and successfully operate the equipment, if he is working across project packages will also be examined.

Will your insurance packages be having scope of offering avenues at lower premium to customers with deferred payment options?
Through our tie-up with a leading insurance provider, we will explore the possibilities of offering various insurance packages to our customers.
NBM&CW November 2015
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