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Muthoot Capital Expects Rise In Two-Wheeler Sales To Aid Loan Book

Muthoot Capital expects two-wheeler sales to be high in January-March as BS-IV stock clears out and BS-VI is introduced, says COO.

Jawa motorcycles displayed at Mehboob Studio in Bandra, Mumbai. (Photo: BloombergQuint)
Jawa motorcycles displayed at Mehboob Studio in Bandra, Mumbai. (Photo: BloombergQuint)

The recovery in two-wheeler sales is expected to sustain through the January-March period on account of pre-buying ahead of the transition to Bharat Stage VI emission norms.

That’s according to Madhu Alexiouse, chief operating officer at Muthoot Capital Services Ltd.

“We are expecting the numbers to be high in the fourth quarter after the festive season recovery,” Alexiouse told BloombergQuint in an interview. “One of the reasons is the old BS-IV inventory would get cleared off and also the initial entry of BS-VI vehicles,” he said. Two-wheeler loans accounted for 95 percent to the company’s Rs 487-crore disbursement in the quarter ended September.

The comments come even as retail sales of two-wheelers—measured in terms of vehicle registrations—grew 5 percent to 13.34 lakh units in October, according to data released by Federation of Automobile Dealers Associations. The segment accounted for 78 percent of overall vehicle registrations in the month.

Also, in November, registrations of two-wheelers jumped 20.7 percent month-on-month and 2.6 percent year-on-year, but that included a spillover of sales at dealers during October-end. Registrations in the previous month were higher than November 2018, which was the festive month last year.

Business Outlook

Muthoot Capital also expects to grow at 20-22 percent annualised rate in terms of loan book growth over the next five years. The Kochi-based firm aims to tap into new customers coming into the financed-vehicles market and the second-hand car business to achieve the target, Alexiouse said. “Our long-term strategy is to be a multi-product organisation.”

“Close to two crore two-wheelers are sold every year. Of this, not more than 37 percent of the vehicles are financed. Rest are bought in cash. A lot of customers will move into financing their purchases as the prices are expected to go up with the advent of BS-VI transition,” the Muthoot Capital COO said.

On Friday, Muthoot Capital shares fell 0.13 percent to Rs 475.00 apiece on the NSE while the benchmark Nifty 50 shed 0.81 percent to end the day at 11,921.50 points

Watch | Muthoot Capital on why BS-IV-related price hikes are a business opportunity