Magma Fincorp scaling down exposure to tractor loans

Kolkata-based Magma Fincorp has seen month-on-month disbursements under tractor lending drop to 15 per cent, compared to 25 per cent in the same period last year.
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SBI ties up with Escorts for tractor financing

The State Bank of India (SBI), the country's largest public sector lender, said it has signed an agreement with Escorts Ltd to finance farmers for purchase of Escorts tractors.
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For Stressed Farm Equipment Loans, SBI Offers One-Time Settlement

State Bank of India is offering to take a 40 percent haircut on stressed tractor and farm equipment loans in a one-time settlement scheme. This scheme will run till March 31.
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Tractor Finance: Magma Fincorp Offers Tractor Loans for New and Used Tractors.

Magma Fincorp offers Tractor loans for all brands of tractors and loans for used tractors also. They offers highest tractor loan disbursement amount in the market.
Magma gives Tractor Loans up to 90-95% of the tractor price.
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Tractor Finance: Easy Tractor Loan & Tractor Finance in India by Mahindra Finance.

Mahindra Finance Repayment for tractor loan is based on cash flows such as monthly/quarterly and half yearly (asset becomes loan free in five years)
This tractor finance is available for a wide range of tractors and stress-free loan sanction without mortgaging of land.
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Tractor Finance News: Special Settlement for Tractor Loan Borrower by SBI

The State Bank of India (SBI), Chennai has given offer for recovery of dues from defaulting farmers who had failed to repay their farm mechanisation and tractor loans. The Special SBI OTS for Tractor and Farm Mechanisation Loans 2015-16 gives the farmer an opportunity to exit the defaulting account.
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Tractor Finance News: Slow Down of Tractor Finance by Magma Fincorp in North Karnataka

Magma Fincorp is very cautious in lending the tractor finance. Company have scaled down their tractor lending finance and moved to the other markets to South Karnataka, where there are irrigation facilities. Our tractor finance business has gone down in Davangere, Hubballi-Dharwad, Sindanur, Raichur and Kalaburagi, Dhrubashish Bhattacharya, Magma Fincorp Business Head added.
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Slower Growth in Tractor Sales

Despite a slower growth in tractor sales this year, non-banking finance companies (NBFCs) continue to bet on tractor financing as no immediate recovery is seen in the commercial vehicle (CV) and car businesses.

After a bumper last year (fiscal 2014), untimely rains and higher base may slow the growth of tractor sales this fiscal.

The industry grew 20% last year, while it is expected to grow 5-10% this year, as per the estimates. Also, the El Nino weather formation may impact agri output, which, in turn, may affect tractor sales.

According to S Sridhar, CEO of Escorts Agri Machinery, the business is currently slower than the expected.

Despite the odds, major NBFCs are looking at increasing their focus on the tractor segment as sales of commercial vehicles and cars continue to decline.

From their peak in fiscal 2012, the overall CV sales have seen a drop of almost 22% in the past two fiscals, as per the data provided by Society of Indian Automobile Manufacturers.

For Mahindra Finance, a part of the Mahindra & Mahindra (M&M) group, tractor business at present forms 18-20% of company's balance-sheet.

About 30% of M&M and Swaraj tractors are currently financed by Mahindra Finance, while on the industry side, its share could be around 15-16%.

"Even though the tractor market is expected to grow slower, we at Mahindra Finance have not slowed down our focus on the segment. In fact, we have started financing second-hand tractors as well," said Ramesh Iyer, managing director, Mahindra Finance.

When asked if the company is looking to expand the tractor business this year, Iyer said it will look at protecting its market share and growing the volumes further.

The company is also looking at increasing its penetration in the rural market.

Mahindra Finance, which had about 970 branches in March end, is looking at adding 150 more in the current fiscal.

Umesh Revankar, MD and CEO of Shriram Trasport Finance, one of the largest NBFCs, said, "Tractor sales may be slower this year and El Nino may have an impact in certain pockets of the country, especially in the North-Western region, which are the biggest markets for tractors.

However, tractor segment is an attractive segment as no immediate recovery is expected in the CV segment and car sales are not likely to be robust this year. We would be focusing little more on the tractor category as we will benefit from better connectivity and better penetration this year," he said.

At present, tractors form around 6% of Shriram's portfolio, which it is looking to grow to 10% in the next 2-3 years.

There are about half-a-dozen major NBFCs financing the tractor sales including L&T Finance, Sundaram Finance, Magma Fincorp, Sriram Transport Finance and Mahindra Finance. Apart from these national players, several small regional players account for a sizeable chunk of the market.

According to an analyst with a foreign brokerage, the tractor segment for most major NBFCs is a good business with better margins.