10 July 2020

Interview - Ramesh Iyer (Mahindra & Mahindra)

In 5-7 years Mahindra Finance will be amongst the prime players in CE financing

Two decades ago, Mahindra and Mahindra Financial Services Ltd commenced its journey in the rural non-banking finance industry. The company today offers financial assistance to segments such as construction equipment both new and used as well as wheeled vehicles.

RAMESH IYER, MANAGING DIRECTOR, MAHINDRA & MAHINDRA FINANCIAL SERVICES LTD offered CONSTRUCTION OPPORTUNITIES an insight into the evolving trends in equipment financing and company’s agenda to tap the market. 


With the Indian government now fast tracking infrastructure projects the CE sector is expected to increasingly get busy. As a firm offering construction equipment finance how do you look upon this scenario as an emerging opportunity?

Infrastructure is an absolute necessity for a country like India, which is aiming to reposition itself in achieving the outlined economic growth indices. The demand for infrastructure in India is growing every day be it in power, telecom, irrigation, airports or ports. The infrastructural requirements will ultimately result in new opportunities in the construction segment thus driving the demand for construction equipment. Hence future infrastructural plans like Smart Cities and development of industrial hubs are also expected to considerably drive the demand for construction equipment. Availability of financial resources is of crucial importance especially in owning or hiring equipment for completion of the assigned tasks.  This is a tremendous opportunity for organisations like Mahindra Finance.


How has business been for your firm in the wake of the economic slowdown and what are your hopes for the forthcoming season?

When seen on the growth rate index, the nation and the construction equipment industry as a whole witnessed a slowdown. However, on productivity basis, we have succeeded in achieving qualitative output. Such challenges however are valuable in strengthening the internal potential and workforce ability of an organisation. Strategising on similar growth plans, Mahindra Finance also focused upon strengthening its operations internally. We established our branch presence and introduced new 250 branches, recruited about 1000 employees and have been providing qualitative training to the workforce to perform effectively on-field. In addition, we have also focused on strengthening our relationships with customers and  implementing certain policy amendments.


Tell us about your current portfolio in relation to construction equipment financing along with details of the business model you follow?  

Mahindra Finance is a latest entrant into the field of construction equipment financing. We forayed into this field, when the sector as a whole was in doldrums. As a strategy, we focused ourselves on strengthening our internal operations. Today, we have strengthened ourselves by catering towards the financing requirements of the construction equipment segment. In the next 5-7 years Mahindra Finance will position itself as one amongst the prime players in the construction equipment financing business. However, as a finance company, we believe that a financial institution should never offer a generalised product or service for its customers. Generalised services often are a hindrance in meeting the dynamic demands of distinct customers. Hence, to tap into the potential of different  customers, Mahindra Finance focuses its services and schemes as per customer requirements and their domain of operations. We have targeted our equipment financing largely upon mid-sized, small and individual customers. Mahindra Finance is also an active player in the used equipment or rental financing domain. We also cater towards the financing requirements of commercial vehicles like trucks, tippers etc., which are witnessing a demand with mounting infrastructure opportunities.


Give us an idea of the current financing trends when it comes to construction equipment finance?

The dwindling growth impact of the construction equipment sector and the economy as a whole also cast its shadow upon the equipment finance industry. There was a sharp fall in the sale of equipment by manufacturers and resulted in aggressive survival strategies to sustain market pressure by the financiers. However, with the situation now improving gradually, and with new opportunities on the anvil, the construction equipment players maintain an optimistic approach. A major financing trend being witnessed among contractors or equipment users or owners is the demand for financiers to support on long-term funding basis, with slight increase in quantum and at favourable prices.

As per the evolving nature of equipment financing seekers in India the contractor or equipment owner opts for a mixed bag of financers often involving 2-3 sources to gain funds. This mixed bag of financiers involves Public Sector Banks, Private Banks, NBFCS and even private financial lending firms. The other major trend being witnessed from the financier’s angle is that each financier has kept a particular limit for a contractor, which might also be a reason behind the contractor opting for multiple financial resources. Also a planned approach is being witnessed from the customer’s point in undertaking calculated risks and adopting financial sources by considering the future requirements and repayment potentials.


What is the support you are offering to the rental equipment segment?  

The increased level of opportunities and complexities in the projects has today led to bifurcation in the project execution process. This scenario ultimately results in the bifurcation of project execution tasks among various level of contractors – large to medium, small and even individuals. Hiring or rental segments in the construction equipment sector plays a prominent role in this situation. As a financier, Mahindra Finance sees tremendous potential in the used equipment financing and rental segments. The opportunities are tremendous especially among the mid-sized, small and even individual contractors. Our schemes are designed as per the respective customer requirements and we have positioned ourselves strategically in exploring these market opportunities.


As a non banking finance organisation how do you measure up against national and international banks which are now offering equipment loan finance? 

We do not compare ourselves with any national and international banks or financial institutions. As a financier, Mahindra Finance is unique in its strategies, schemes and policies. We have proved our expertise in financing distinct range of segments varying from two-wheelers to 20-wheelers. 

Today, we also have our presence in construction equipment and used equipment financing. Mahindra Finance is the only national player who has a strong and focused rural base. We have so far financed about 3 million customers, of which about 1.8 million customers, having potential to repay instalments, are located in 2.6 lakh villages in our country. We have particularly focused on exploring the evolving potential in the rural market. 


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