Notably, for newer players in the L5 E3W space, availability of finance is one of the biggest challenges. According to Finayo, first loss default guarantee (FLDG), remains a challenge with newer OEMs, and until that is worked upon, the challenge will not be solved.
Finayo is gauging the potential of financing electric two-wheelers (E2W) and L5 three-wheelers (E3W) in India. Brajendra Singh Tomar, Founder & CEO, Finayo, in a conversation with Electronics B2B mentioned this company is working with multiple lenders in India to enable financing of L3 E3Ws.
“We have financed close to 2,000 L3 E3Ws in our first year of operations so far. Finayo will close this fiscal at a number much bigger than this as there are still five months to go,” he said.
According to him, what the Finayo platform helps these lenders with is the “intention of paying pack” of a consumer. The start-up claims to have developed algorithms that look beyond CIBIL reports to gauge the same. Rathore pointed out that “there are individuals” who do not even have CIBIL reports, and Finayo has enabled loans for the same.
“Such loans also help individuals in creating CIBIL reports for future. In tier III and tier IV cities, L3 E3Ws have been adopted in good numbers, and finance has played a great role in that, he explained.
NPA of Less Than 1%
Finayo says that it is currently maintaining a non-performing asset (NPA) rate of less than 1%. Only owners of “seven” out of the total vehicles financed by the company have defaulted on payments. “Apart from the software that helps us gauge whether an individual has the intention of repaying, we also run several programs which award the consumer when they make timely payments,” Tomar said.
With finance partners such as Mufin on board, the start-up is now looking to start financing E2Ws in India. However, similar to the L3 E3W domain, it will stick to financing in the B2B domain. In simpler words, Finayo will only finance E2Ws which will be deployed in logistics and transportation work.
“More than fleet owners, we have been working with private owners,” Tomar explained. He added that while fleet financing is a good option, rural India still “pretty much” is run by individual and small businesses. Further, unsure about entering the L5 E3W finance business immediately, Tomar says the same will happen soon.
Notably, for newer players in the L5 E3W space, availability of finance is one of the biggest challenges. According to Finayo, first loss default guarantee (FLDG), remains a challenge with newer OEMs, and until that is worked upon, the challenge will not be solved.
“Newer players need to back financers and lenders with minimum of 5% FLDG. This shows that they have confidence in their product. If they are not willing to offer at least that, the same might indicate the OEM is not confident in their own product,” he said.
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According to BYJU’s, FLDG is an arrangement whereby a third party such as a financial technology (fintech) player (LSP or lender service provider) compensates lenders if the borrower defaults. The LSP provides certain credit enhancement features such as a first loss guarantee up to a pre-decided percentage of loans generated by it.
“A lot can be recovered by recovering the NPA vehicle and selling it but a small part, as a token of confidence, needs to come from OEMs as well,” Tomar adds.
A joint report by Niti Ayog, Boston Consulting Group, and Asian Development Bank has also advised setting of up low-cost funds with risk sharing mechanisms / FLDG as one of the potential enablers of availability of finance for EVs in India.
Having disbursed Rs 23 crore so far, the start-up is looking to aid lenders finance over Rs 100 crore more this fiscal. The average ticket size of a L3 E3W for it is Rs 1.75 lakh. The same for a L5 E3W is around Rs 3.75 lakh in the market.
