Innovative Financing Models Fuel Growth
The construction equipment finance industry plays a crucial role in fostering infrastructure development across emerging markets, particularly in economies like India. As urbanisation accelerates and infrastructure projects expand, the demand for construction equipment is growing at an impressive rate. However, financing the acquisition of such costly machinery presents a unique set of challenges for both construction companies and financing institutions.
In a country like India, where the construction industry is the backbone of economic growth, financing the right equipment is vital for the timely completion of infrastructure projects. From road building and bridge construction to large-scale industrial ventures, the right equipment accelerates project timelines and enhances efficiency. However, the hefty price tags attached to these machines mean that many construction businesses—especially small and medium-sized enterprises (SMEs)—rely on equipment finance to maintain their competitive edge.
Recently, Action Construction Equipment (ACE) signed a Memorandum of Understanding (MoU) with Bank of Baroda to facilitate financing solutions for construction equipment businesses. Under this partnership, ACE customers across India will have access to tailored financing options provided by Bank of Baroda.
Manish Handa, Vice President & Business Head – Earthmoving Equipment Division, ACE, expressed, “We are delighted to sign this MoU with Bank of Baroda. This collaboration will undoubtedly benefit our customers by providing a wider range of financing options nationwide and offer a growth platform for both ACE and Bank of Baroda.”
Similarly, Sany India has entered into an MoU with Union Bank of India and J&K Bank. This strategic partnership aims to foster significant growth and development opportunities across the country, while providing enhanced financial support to its customers. The collaboration will facilitate easier access to Sany India’s advanced product line, along with readily available financial solutions.
Sanjay Saxena, COO, Sany India, highlighted the importance of Union Bank of India for equipment financing, stating, “The MSME schemes offered by Union Bank of India benefit all profiles of construction equipment customers. This partnership underscores the bank’s strong commitment to funding construction equipment. With Union Bank of India as our preferred financier, customers can conveniently access financing solutions for our earthmoving and construction equipment without exploring alternative options.”
Saxena also mentioned the significant role J&K Bank plays in the region, adding, “With 80 percent of our equipment sales in Jammu and Kashmir financed through J&K Bank, this partnership underscores the bank’s deep penetration and importance in the region. As J&K Bank becomes our preferred financier, customers can easily access financing solutions for our earthmoving and construction equipment.”
JCB India has partnered with Federal Bank to offer greater financing options to customers purchasing JCB machines in both urban and rural India. Deepak Shetty, MD and CEO of JCB India, commented, “This partnership will provide more financing options for our customers, enabling easier access to our equipment.”
Additionally, NBFC Manappuram Finance has also teamed up with JCB India to finance the ITS range of equipment and engineering products.
Karnataka Bank has entered into an MoU with JCB India to enhance lending avenues under the bank’s MSME portfolio. Under this partnership, JCB will nominate Karnataka Bank as its finance partner, allowing individuals, contractors, companies, partnership firms, LLPs, etc., to avail loans at competitive interest rates for purchasing a wide range of world-class equipment from JCB India’s product line.
Mahindra’s Construction Equipment Division (MCE) recently signed an MoU with Bank of Maharashtra to offer tailored financing solutions for its construction equipment division. This collaboration will provide unique financial assistance for purchasing Mahindra’s current and upcoming BSV range of construction equipment, offering some of the best interest rates and loan tenures.
The partnership is designed to provide hassle-free, adequate credit for the purchase of equipment such as RoadMaster (motor graders), EarthMaster (backhoe loaders), and an extensive range of attachments. These products are expected to set high standards in their categories and contribute to accelerating infrastructure growth through cutting-edge features and adherence to industry best practices.
In another significant development, IndusInd Bank and the Japan Bank for International Cooperation (JBIC) have signed a $100 million long-term loan agreement to foster the growth of Japanese construction equipment companies in India. The credit facilities will be extended to upstream and downstream companies, co-financed by Mizuho Bank, Japan; Shizuoka Bank, Singapore; and Joyo Bank, Japan. The initiative will initially cover component suppliers, dealers of select Japanese OEMs, and final buyers of their construction machinery.
Srei Infrastructure Finance (SIFL) recently appointed Hardayal Prasad as its new Managing Director and CEO. The company has also received an investment interest of Rs 2,000 crore from a US-based Arena Investors LP (Arena)-led consortium. Previously, Srei Infrastructure had received a Rs 2,200 crore investment proposal from Singapore-based Makara Capital Partners Pte Ltd.
The strategic coordination committee has received a term sheet from Arena Investors LP and its consortium, indicating interest in an investment of Rs 2,000 crore, subject to terms and conditions outlined in the agreement, as reported in a regulatory filing by SIFL’s parent company, Srei Infrastructure.
Shriram Finance, India’s leading retail non-banking financial company (NBFC), is also expecting robust growth in the construction and farm equipment sectors in the second quarter of this financial year. This growth is attributed to rising government infrastructure spending and favorable monsoon conditions, according to a company executive. Shriram Finance has also projected a 15 percent growth in assets under management (AUM) for the current fiscal year.
Umesh Revankar, Executive Vice Chairman, Shriram Finance, stated, “We’re seeing increased demand for construction vehicles, which is expected to accelerate as India’s infrastructure spending continues to rise. We anticipate greater activity in this category after the monsoon. With favorable monsoon conditions, we also expect an increase in demand for farm equipment. We are closely monitoring this, and I believe the construction and farm equipment sectors will see faster growth in the second quarter.”
The Road Ahead
The construction equipment finance market stands at the crossroads of tremendous opportunity and complex challenges. With government infrastructure pushes, favorable weather conditions, and the digital transformation of financing models, the sector is poised for significant growth. However, sustaining this growth will require both financial institutions and construction firms to navigate challenges like capital intensity, fluctuating demand, and non-performing assets (NPAs).
By leveraging digital technology, introducing flexible financing models, and incorporating risk management strategies, stakeholders can pave the way for a more resilient and sustainable construction equipment finance market. With a strong focus on innovation and strategic growth, this sector can continue to drive infrastructure development and economic growth across emerging markets like India.
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