Trend in new CV disbursements

1000 50%
50%, 40%
800 30%

670

 

20%

soa 11% on ee im
496

0%
400 10%
-20%
200 ii -30%
38%" 37% 40%
o -50%

Fyi4. FYISFY16) | FYI7.FY18.-FY19FY20EFY21PFY22P_—FY23P.
mmm New CV Financing Disbursement (Rs. Bn) Growth Rate (%)

Note: E Estimated, P: Projected
Source: SIAM, Company Reports, CRISIL Research

MHCV segment to drive growth for used commercial vehicle market

The used-CV finance market recorded strong growth till Fiscal 2015, supported by demand from small-fleet operators
and first-time users, and rising need for freight transport, healthy profitability and availability of finance. However, in
Fiscals 2016 and 2017, the growth was muted due to low demand, resulting in slower disbursement growth. Also, the
replacement cycle of large-fleet operators has stretched to almost five years from an average of four years owing to lack
of visibility on contracts and existing unutilized capacities.

In Fiscal 2018 and Fiscal 2019, the loan disbursement for purchase of used commercial vehicle bounced back. The used
medium and heavy commercial vehicle segment has witnessed a faster growth than light commercial vehicles because of
increasing demand from road and mining sector along with a stricter implementation of overloading ban.

In Fiscal 2020 and the first quarter of Fiscal 2021, The demand for used commercial vehicle saw a decline on account of
weak fleet demand from customers, owing to the nationwide lockdown to curb the pandemic. The pandemic has resulted
in a slowdown in economic growth, leading to low capacity utilization of existing fleets of the transport operators.
However, on expectations of recovery in economic growth in the second half of Fiscal 2021, recommencement of stalled
real estate and infrastructure projects, the demand for used CVs is expected to bounce back faster than the new CV
segment. In the backdrop of BS-VI transition, financing is expected to be stronger in case of used MHCV as transport
operators are likely to shift towards cheaper BS-IV vehicles because of a jump in prices of new BS-VI vehicles.

Competitive Scenario
Over the years, banks and NBFCs have competed for the major share in the CV financing market by improving connect
with customer segments, improving rural presence, offering flexible payment schemes, offering cash payments, and easy

documentation facilities. As SFBs are continuously diversifying their portfolios beyond microfinance, the SFBs are
expected to capture share from NBFCs.

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