Auto companies seek bank breather for dealers

Mumbai | New Delhi | Kolkata: Maruti Suzuki, India’s biggest carmaker, and the local unit of Toyota are joining the list of companies that are seeking better financing terms and softer rates of interest for their partners and vendors, helping the intended benefits of the three-month grace period on loan repayments reach the broader ecosystem.Maruti Suzuki has initiated discussions with 13 inventory financing partners, including State Bank of India, HDFC Bank, ICICI Bank, Axis Bank and Kotak Mahindra, for extension of moratorium to its dealers.“There is no retail sale now, yet the clock is running on inventory financing. It is a major burden on dealers,” said Shashank Srivastava, executive director (marketing and sales) at Maruti Suzuki.The company has 329 dealer partners and 3,000 outlets in the country.The proposal would have to be approved by the board of individual banks. A clarification is also awaited from the Reserve Bank of India (RBI) regarding the extension of moratorium on short-term loans such as inventory finance. Interest will continue to accrue on the loan during the period of moratorium.The interest, along with the amount deferred, can be spread over the remaining tenure of the loan. Alternatively, banks can extend the overall tenure of the loan.Naveen Soni, senior vice-president at Toyota Kirloskar Motor (TKM), said the company has approached its financing partners, including ICICI Bank, Kotak Mahindra, HDFC Bank and SBI, to seek an interest rate reduction on inventory financing for dealers.“A moratorium is only a postponement. We are asking finance companies for a deduction in interest rates. Toyota Kirloskar Motor would pay a proportion of the reduced interest rates directly to finance companies to help its dealer partners,” said Soni. “Besides, we are looking at a series of measures to ensure that our dealers have working capital for 38-75 days.”Bankers said all companies, regardless of size or financial soundness, will use the moratorium to conserve cash flows.“My feeling is that the majority of companies — large or small — will make use of this dispensation. We have already received letters from companies that have asked to be part of the moratorium, though a board-level policy is yet to be formalised,” said Rajkiran Rai, CEO at Union Bank of India. “The general feeling is that the scenario after three months is uncertain; so it is better to conserve cash even if you have some to spare.”Borrowers missing payments during this period — up to May 31 — will not be tagged as defaulters and neither will they be reported to credit information companies.JSPL managing director VR Sharma said the company wants concessions from banks as well as the railways.“We want banks to provide one more month’s working capital which can be recovered in the next 4-5 months. We want the railways to extend credit worth one month’s dues or ₹300 crore, without bank guarantee to allow movement of critical steelmaking inputs,” Sharma said.Banks are already in the process of forming a board-level policy.“There is an impact across the board and those companies which choose to take this dispensation should in no way be considered weak. Cash flows for even the strongest companies have been disrupted due to this lockdown and everyone will try to mitigate their risk. As a bank, it is also easier for us to extend this moratorium to everyone because choosing companies and extending it selectively will be time-consuming, especially when we are working with the minimum staff,” said a senior SBI official.

from Economic Times https://ift.tt/3bDY2ys