International Tractor Ltd (ITL) is foraying into non-banking non-banking finance segment to offer loans for its tractors besides other products in rural market, according to a top company official.
The company has received nod from the government to enter the segment with a wholly-owned subsidiary, Autotrac Finance Ltd (AFL), and the move is expected to help it in meeting target of selling two lakh tractors annually in the next five years, Sonalika International Tractors Executive Director Raman Mittal told .
"At present, 80 per cent of tractor purchase is financed and and the rest 20 per cent is on cash payment. However, whenever there is distress in the rural economy, the financing option is not available. So we thought of addressing this through our own captive financing," he said.
Mittal further said AFL received the licence to enter the segment in August and by February 2019 the company is expected to start financing.
When asked about investments in the venture, he declined to to share details but said, "In the short term of a two-year window we are looking at 10 per cent of ITL's business, business, which could translate to a book order of around Rs 500 crore."
ITL is known for its Sonalika brand of tractors. It has also introduced new products under the Sikander range.
On whether AFL would also finance tractors of other brands, Mittal replied in the negative and said, "We would look at diversifying portfolio by financing other products which are relevant to the rural market, not necessarily other tractor brands."
Last fiscal, the company had crossed the one lakh annual sales milestone and had set a a target of selling two lakh units a year in the next five years. As part of the plan, ITL is also entering the Chinese market this year.