Growing demand for Commercial Vehicles (CVs) and construction equipment will drive infrastructure financing for Kotak Mahindra Bank in the second half of the current fiscal. The private lender managed to grow its construction equipment and commercial vehicle advances grew by 26% to reach Rs 31,000 crore at the end of first half and the bank plans to maintain this growth momentum in the second half.
“The overall macroeconomic environment and government’s focus on infrastructure has really helped improve the demand for construction equipment and commercial vehicles. This has boosted the demand for loans for commercial vehicles and construction equipment,” Amit Mohan, President – Logistics and Infrastructure, Kotak Mahindra Bank told FE. “Our construction equipment and commercial vehicle advances grew by 26 percent in the first half and we expect to maintain growth momentum in the second half,” he added.
Out of a total Rs 31,000 crore loan book as of September 30, the share of commercial vehicle advances is nearly Rs 17,500 crore while construction equipment loans account for Rs 7,500 crore and the rest is working capital loans.
The bank has managed to grow its loan book more than the industry growth.
“The commercial vehicle industry, in terms of the number of units sold, has grown by 3% in the first half, but our commercial vehicle retail financing has grown 29% in the first half,” Mohan added. “Construction equipment as an industry has grown by 20% in the first half while our equipment financing has grown by 22%,” he added.
The demand for commercial vehicles, mainly goods carriers, is coming from cement, steel, mining, FMCG (Fast Moving Consumer Goods) and real estate sectors. In the case of passenger vehicles, the demand is mainly coming due to rising tourism activities, increasing inter state travel, and the return of employees to offices as companies gradually phase out of work from home for their workforce.
“We expect to grow our market share in the commercial vehicle financing and in construction equipment financing we will protect our market share going forward,” said Mohan.
Kotak Mahindra Bank’s share in the commercial vehicle financing is around 5% while its share is 10% in equipment financing.