Ramesh Iyer, Managing Director, Mahindra & Mahindra Financial Services

What were the main drivers of profitability last fiscal?
A very important element of growth last fiscal has been the non-availability of money in the market simply because a financier is in demand when money is not available. A second reason is our selection of geography since we have always chosen to participate in a niche market, which in our case is the rural market. We have created a large network and this has given us the advantage of being locally available. A final driver was our tie-up with Maruti last July. We saw the benefit of this partnership within six months. Our prime products have also done well. Both tractors and cars have contributed to our numbers. We finance close to 3,500 tractors monthly. We also entered second hand financing last year, and the numbers here are 1,500 cars a month.

What kind of benefit has the Maruti tie-up given to the business?
We were financing about 800 cars prior to our agreement with Maruti. After the deal, our numbers went up to 2,000-3,000 cars monthly, and now we are at 3,500 cars.

How do you plan to maintain profitability?
Our strategy is to have more branches and people. We want to be close to customers and participate in every product we are selling. It is also to spread our sales across the country. We have derisked our business model by geography and product. Market share is important, but it is important to us on a widespread basis rather than in a concentrated area. We are also lucky to have Punjab Tractors on the platter. This allows us to finance 10,000 more tractors straightaway. The Mahindra-Renault Logan has been launched. If they target selling 50,000 cars, we should at least finance 10,000 cars, if not more.Mahindra & Mahindra is about to launch new commercial vehicles, and our numbers here should be around 1,000 vehicles a month. While all of this may not dent the market share of others, it will still shore up our bottomline.

What prompted you to enter used vehicle financing?
In used car financing, we have not found a very organised set up in the rural market. We realised that our customers transact their vehicles after three or four years of use, and so we decided to participate in this financing. We also realised that this financing would improve the resale price of the used vehicle. And so customers are very happy with this kind of a tie-up.

What is your strategy for two-wheeler financing?
We entered two-wheeler financing last year on a pilot basis, testing it in Gujarat, Maharashtra and Madhya Pradesh. We quickly realised that the financing for two-wheelers in the rural market is very limited. Any player who is in two-wheeler financing is very city-based or where banking operations are available on a large scale. The fact that about 70 percent of Mahindra dealers are also two-wheeler dealers is again an advantage for us. Today, we have a base of six lakh customers who could also be two-wheeler buyers. So our strategy is to increase the market size for two-wheeler financing with our large customer base.

What is the focus on commercial vehicle financing?
We already finance about 700-800 Mahindra light commercial vehicles. Our strategy here will be to target single truck operators, rather than fleet operators. The reason is we believe our skill sets are in understanding a customer’s ability to earn and repay. Therefore, we are not looking for price sensitive customers. Being located in areas not yet reached by others, we are not offering price as a product to buy market share. Ours is a partnership method where we understand the customer’s cash flow and his capability to repay.