- 05 Mar 2025
- ICICIdirect Research
TWO-WHEELER FINANCIERS, INCLUDING NBFCS AND CAPTIVE FINANCING ARMS OF MANUFACTURERS, ARE TIGHTENING LENDING PRACTICES
News: Two-wheeler financiers, including NBFCs and captive financing arms of manufacturers, are tightening lending practices due to a 150 basis points rise in loan defaults. Measures include reducing loan-to-value ratios from 85-90% to 70% and shortening loan tenures from 24 to 18 months. This credit tightening is expected to impact the two-wheeler industry, where approximately 75% of purchases are financed, especially in the entry-level motorcycle segment (100cc-110cc). In February, two-wheeler sales declined by 6% YoY to 1.4 million units, according to data from the Vahan portal.
View: Bajaj Finance, Hero Fincorp, and Shriram Finance may face valuation pressure as tighter lending slows loan book growth and higher defaults increase provisioning. Lower interest income and asset quality concerns could impact negatively keeping valuations in a broad range with a downside bias until credit conditions stabilize.
Impact: Negative