Page 107 - Constrution Opportunities December 2016 Digital Edition

INDUSTRY FOCUS: EQUIPMENT FINANCE equipment safety and environmental regulations on par with the global construction equipment industry, along with training skilled manpower for construction equipment, will enable large organised rental players to improve their value proposition EquipmEnt financing against the cost-competitiveness of smaller unorganised players. Tis will help attract more customers to larger rental players and improve rental penetration. In the developed economies of the United States, Japan, and Europe, large rental players ofer the latest equipment with an average feet age of only two to four years, and they ensure that the Unfavourable regulations: Indirect ChaLLenging the equipment complies with regulations. Tey taxation on construction equipment in shortComings also provide lower maintenance costs and India is 21 - 38 per cent , higher than France For companies to tide over challenges, they ofer operators from a pool and Germany's 20 per cent and Indonesia's need to work on these essential aspects: of qualifed manpower. 12 – 17 per cent , according to a CII report. oem-supported financing: OEMs Says DK Vyas, Ceo, Further, lease transactions are subject to should incorporate in-house financing srei BnP Paribas dual taxation: a value-added tax (VAT) and arms or forge long-term relationships with “There have been some a service tax. banks or NBFCs that can reach small reforms in the recent An array of entry taxes and lifetime Regional contractors. Some OEMs in India already past which have helped Transport Ofce (RTO) taxes imposed by have exclusive contracts with NBFCs, but the infrastructure sector to become more various states make moving construction much more could be done: First-time users fluid in its functioning and the present equipment between states unviable. In could be ofered buyback schemes or a co- government has done a commendable job addition, the 15 per cent depreciation rate for borrowing option to give them easy access to plug the fundamental defciencies.” construction equipment assets (compared and better fnancing terms. OEMs such as with 30 per cent for commercial vehicles) Atlas Copco (a Swedish manufacturer) and trenDs to WatCh oUt For is too low compared to the falling asset life some large fnancing players in the United Going ahead, we would witness many as a result of rapid technological progress States ofer equipment buyback as part of revolutionary trends shaping up in the and equipment obsolescence. Moreover, their fnancing options. OEMs could also equipment fnancing space. Some of them for interest paid to NBFCs on loans for collaborate with third parties or other are: equipment fnancing, tax is deducted at the OEMs to provide channels for equipment integration holds the key: Take an example source, which is not the case with banks. In exchanges. of automotive sales, whenever you purchase addition, external commercial borrowing Uniform tax regulations: Standardised a car, the dealer just doesn’t inform you as a source of funds is available only when tax laws across states can significantly about the models, colours and trim packages purchasing imported equipment; it is not boost equipment purchases, rentals, and available, but also about the financing available for domestic equipment, highlights resale. National registration of construction options and the EMIs as well. Specifcally, ATKearney report. equipment can eliminate the need to pay for any deal to come through, sales and Low rental penetration: Organised players multiple lifetime RTO taxes. With the financing need to be integrated. Today, with large rental fleets are in limited implementation of GST rate, this scenario businesses are looking for the same service numbers in India because they lack the should change for good. and financing options from equipment capital to expand. Organised players also more efcient collections: Te usage of sellers. face huge pricing competition from the telematics systems with GPS services need automation will take centerstage: unorganised segment, where players are to be harnessed to track equipment and Equipment fnancing companies to need to involved in of-the-book cash transactions improve collections. Global OEMs provide quickly take the automation route to sustain and can therefore ofer much lower rates. such systems with their equipment, and and survive in this tech-led market. Tey Used equipment and the secondary sales some of these oferings are already in India. need to make the entire process foolproof market are also highly underdeveloped in Providing further policy support to NBFCs and transparent to effectively manage India because of an absence of established for payment collection, regulations will payment terms and other important services trading platforms and a lack of buyback empower NBFCs to move against defaulters associated with fnancing. schemes from OEMs. Above all, ownership and claim tax benefts against bad loans, as Tere will be rise of next ‘Uber’: We are still remains the preferred option for Indian banks do. moving over to rental space very fast, though users. Developing the rental ecosystem: Creating not at pace of our global counterparts. 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