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MOSL: NBFC (Ground Reality)-Good times for CV financiers; Used CV prices stable; CV repossessions by financiers declining

NBFC (Ground Reality): Good times for CV financiers; Used CV prices stable; CV repossessions by financiers declining

 

• We visited an outlet of Shriram Automall in the outskirts of Mumbai to get an understanding of the volumes and pricing in the used vehicles market.
• While the CV market has witnessed some 'disruption' in the past few years (with demand moving towards HCVs/LCVs and away from MCVs), pricing trends in the used CV market have been positive. Demand has increased in certain segments such as tippers and construction equipment. Repossession and sale of CVs, on the other hand, has come off over the past few quarters, implying improved asset quality.
• We are positive on the vehicle finance space, given the demand outlook, improved asset quality and end of some regulatory headwinds (migration to 90dpd). Our top pick within this space is Shriram Transport Finance.

 

Among the largest vehicle marketplaces; ~350 auctions per month

Shriram Automall Limited (SAL) has 75 automalls and 180 yards across the country. With 2-3 auctions per month per automall, it conducts about 350 auctions at a pan-India level every month. All categories of vehicles are auctioned here - 2W/3W/4W/ CV/CE. Clients include the parent, Shriram Transport Finance, and other leading banks and financial institutions. SAL follows a reserve-price-based auction, below which the vehicle is not sold. On an average, 100-150 vehicles are put on auction at a time, of which ~70% get sold. About 70% of vehicles sold are Tata vehicles.