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KOTAK CAR FINANCE
Key takeaways
Kotak Car Finance is the fourth largest passenger vehicle financier in India. HDFC Bank,
State Bank of India and Mahindra Finance occupy the top-3 positions.
They indicated that passenger car volume growth is likely to remain challenging this year
and they do not expect more than a single-digit growth in FY2012E. They expect a pickup
in volumes in festive season and cautioned if retail sales do not pick up in festive
season, a flat growth in passenger car segment could be seen in FY2012E.
Inventory levels of manufacturers have increased from 35 days to 40-45 days and
manufacturers have cut production in August to align their production with retail
demand.
They indicated that passenger car demand has picked up in August but we believe this
could be due to increase in demand from new Swift and we should wait for few months
to see passenger car demand could again start growing at a robust pace.
Diesel engine capacity is in short supply which is depressing overall car demand.
Competitive intensity is increasing as Honda has cut prices of Jazz quite sharply which
could lead to rise in Jazz volumes.
Discounts on cars have increased sharply in July-August from 1QFY12 levels which could
pressure car manufacturers’ operating margins.
Current interest rates are ~12.25-12.75% which have risen by 175 bps since December
2010. Borrowing costs has come down by 25-30 bps since June 2011 and has been
passed on to the customer. They don’t expect any more rate hikes in the passenger car
space due to increase in competitive intensity in the passenger car finance space.
68% of total cars are being financed currently which has come down from 74% in
FY2011. Second car buyer is deferring his purchase decision due to economic uncertainty
while first-time car buyer proportion in overall volumes has increased.
Asset quality is surprising, the best they have seen historically due to better customer
profiling by the financiers. They do not expect much deterioration in asset quality over the
coming months.
India Equity Research Reports, IPO and Stock News
Visit http://indiaer.blogspot.com/ for complete details �� ��
KOTAK CAR FINANCE
Key takeaways
Kotak Car Finance is the fourth largest passenger vehicle financier in India. HDFC Bank,
State Bank of India and Mahindra Finance occupy the top-3 positions.
They indicated that passenger car volume growth is likely to remain challenging this year
and they do not expect more than a single-digit growth in FY2012E. They expect a pickup
in volumes in festive season and cautioned if retail sales do not pick up in festive
season, a flat growth in passenger car segment could be seen in FY2012E.
Inventory levels of manufacturers have increased from 35 days to 40-45 days and
manufacturers have cut production in August to align their production with retail
demand.
They indicated that passenger car demand has picked up in August but we believe this
could be due to increase in demand from new Swift and we should wait for few months
to see passenger car demand could again start growing at a robust pace.
Diesel engine capacity is in short supply which is depressing overall car demand.
Competitive intensity is increasing as Honda has cut prices of Jazz quite sharply which
could lead to rise in Jazz volumes.
Discounts on cars have increased sharply in July-August from 1QFY12 levels which could
pressure car manufacturers’ operating margins.
Current interest rates are ~12.25-12.75% which have risen by 175 bps since December
2010. Borrowing costs has come down by 25-30 bps since June 2011 and has been
passed on to the customer. They don’t expect any more rate hikes in the passenger car
space due to increase in competitive intensity in the passenger car finance space.
68% of total cars are being financed currently which has come down from 74% in
FY2011. Second car buyer is deferring his purchase decision due to economic uncertainty
while first-time car buyer proportion in overall volumes has increased.
Asset quality is surprising, the best they have seen historically due to better customer
profiling by the financiers. They do not expect much deterioration in asset quality over the
coming months.
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